SECURITIES (SPECIFICATION OF APPROVED ASSESTS, LIQUID ASSESTS AND RANKING LIABILITIES) NOTICE

SECURITIES (SPECIFICATION OF APPROVED ASSESTS, LIQUID ASSESTS AND RANKING LIABILITIES) NOTICE

SECURITIES (SPECIFICATION OF APPROVED ASSETS,

LIQUID ASSETS AND RANKING LIABILITIES) NOTICE

(Cap. 333, sectioi 65B)

[2 April 1986.]

ice may be cited as the Securities (Specification of
Liquid Assets and Ranking Liabilities) Notice.

2. In this notice, unless the context otherwise requires

approved subordinated loan' means loan on which the lender's claim
is subordinated to the prior payment or provision for payment in
full of all claims of all other present and future creditors of the
borrower, and which is made under a valid and legally enforceable
agreement, the terms of which have been approved by the
Securities Commission;

'deposit-taking company' means a deposit-taking company that is
registered or licensed under the Banking Ordinance;

'licensed bank' means a bank licensed under the Banking Ordinance'
'overseas bank' means a bank
incorporatred or established by or under the law or other authority in any country, state or place outside
Hong Kong;

'recognized stock market' means a stock market recognized by the
Securities Commission for the purpose of section 65A(2)(a)(ii) of
the Ordinance.

3. The following assets of a dealer or dealing partnership,
which form part of his or their business of dealing in securities and
are beneficially owned by the dealer or the dealing partnership, as
the case may be, are specified as approved assets for the purposes of
section 65B of the Ordinance in accordance with paragraph 6-

(a)cash in hand and contract note stamps (used for the purposes
of the Stamp Duty Ordinance);

(b)money on account with a licensed bank or a deposit-taking
company.

(c)money which is on account with an overseas bank and is
freely remittable to Hong Kong

(d)80 per cent by value of certificates of deposits, acceptances,
tloating-rate notes and other negotiable instruments that are
commonly known as commercial papers, the advertisement of
which has been authorized by the Securities Commission
under section 4(2)(g) of the Protection of Investors
Ordinance;





(da) 80 per cent by value of bills certificates, notes, paper or

other debt instrume other than those mentioned in

sub-paragraph (d), which

(i) are negotiable;

(ii) have a remaining term to maturity of not more than 10
years; and

(iii) are denominated and traded in Hong Kong dollars or in
a currency freely convertible into Hong Kong dollars, unless
the Securities Commission disallows any such instrument in a
particu ar case;

(db) 80 per cent by value of securities issued by the governments
of Australia, Canada, the Federal Republic of Germany, Japan,
the United Kingdom or the United States of America;

(e)tax reserve certificates issued under the Tax Reserve
Certificates Ordinance;

[Deleted, L.N. 404/87]

(g) utility and rent deposits;

(h) statutory deposit: made under section 52 of the Ordinance;

(ha) contributions to towards the Unified Exchange Compensation
Fund established under section 99 of the Ordinance;

(i) prepaid expenses ;

(j) shares in the Exchange Company at nominal value;

(k)payments made for or towards the purchase of securities for
which a listing on the Unified Exchange is pending;

(ka) payments made for or towards the purchase of securities for
which a listing is pending on a recognized stock market;
(kb) 60 per cent by value of securities, other than those men-

tioned in sub-paragraphs (da) and (db), which are listed on a
recognized stock market;

(1)60 per cent by value of securities listed on the Unified
Exchange;

(m)60 per cent by value of units in a unit trust and of shares in a
mutual fund corporation, which are authorized under

section 15(1)(c) of the Ordinance;

(n) gold bullion;


(o)interests in jinmovable property in Hong Kong, subject to a
maximum value of 25 per cent of the requisite minimum net
capital required under section 65B of the Ordinance.





3A. Amounts receivable in the ordinary course of business of
dealing in securities, other than amounts receivable which are due to be
settled against delivery of securities, but which remain outstanding for
more than 5 bank trading days, are specified as approved assets for the
purpose of section 65B or the Ordinance.

4. The following approved assets of a dealer or a dealing
partnership are specified as liquid assets for the purposes of section
65B of the Ordinance in accordance with paragraph 6

(a)cash in hand and contract note stamps (used for the purposes of
the Stamp Duty Ordinance);

(b)money on account with a licensed bank or a deposit-taking
company, which in the case of a time deposit will become payable
within 6 months;

(c)money which is on account with an overseas bank and is freely
remittable to Hong Kong and which, in the case of a time
deposit, will become payable within 6 months;

(d) 80 per cent by value of certificates of deposit, acceptances,
floating-rate notes and other negotiable instruments that
are commonly known as commercial papers, the advertise-
ment of which has been authorized by the Securities

Commission under section in 4(2)(g) of the Protection of Investors
Ordinance;

(da) 80 per cent by value of bills, certificates, notes, paper or other
debt instruments, other than those mentioned in
subparagraph (d), which

(i) are negotiable

(ii) have a remaining term to maturity of not more than
10 years; and

(iii) are denominated and traded in Hong Kong dollars or in
a currency freely convertible into Hong Kong dollars, unless
the Securities Commission disallows any such instrument in a
particular case;

(db) 80 per cent by value of securities issued by the govern

merits of Australia, Canada, the Federal Republic of

Germany, Japan., the United Kingdom or the United States
of America;


(e)tax reserve certificates issued under the Tax Reserve
Certificates Ordinanc

amounts receivable in the ordinary course of business of

dealing in securities, which are due to be settled against
delivery of securities, but excluding amounts which remain
outstanding for more than 5 bank trading days;





(g)amounts receivable in the ordinary course of business of
dealing in securities, other than amounts of the kind referred to
in sub-paragraph (f), to the extent of the net realizable value
of any readily marketable unencumbered collateral for those
amounts, which is in the possession or control of the dealer or
dealing partnership;

(h)payments made for or towards the purchase of securities for
which a listing on Unified Exchange is pending;

(i)60 per cent by value of securities listed on the Unified
Exchange;

(j)60 per cent by value of units in a unit trust and of shares in a
mutual fund corporation, which are authorized under section
15(1)(c) of the Ordinance;

(k) gold bullion;

(l)payments made for or towards the purchase of securities for
which a listing is pending on a recognized stock market;

(m) 60 per cent by value of securities, other than those

mentioned in sub-paragraphs (da) and (db), which are

listed on a recognized stock market.

5. (1) Subject to sub-paragraph (2), the following liabilities

of a dealer or dealing partnership are specified as ranking liabilities
for the purposes of section 65B of the Ordinance-

(a)amounts payable in the ordinary course of business of dealing
in securities;

(b) overdrafts and loans from licensed banks, deposit-taking
companies or overseas banks;

(c) accrued expenses;

(d) tax payable;

(e)any liability that is secured on an approved asset within the
meaning of paragrahp 3;

(f) all other liabilities that are regarded as liabilities under
generally accepted accounting principles, other than any
approved subordinated loan from a lender, which is-

(i) a member of a recognized stock market; and
(ii) the holding company, associated company or sub-
sidiary company of the dealer or the dealing partnership, as
the case may be;

(g)provision for contingent liabilities in accordance with generally
accepted accounting principles.

(2) Notwithstandinig sub-paragraph (1), where a dealer or dealing
partnership, in the acquisition of any fixed asset that is used





in the ordinary course of business of dealing securities, incurs any
liability that is not required to be settled within 12 months, the
liability shall not, to the extent of the net book value of the asset, be
included as a ranking liability for the purposes of calculating the liquidity
margin of the dealer or dealing artnership, as the case may be.

6. (1) Subject to sub-paragraphs (2) and (3), all approved or liquid
assets shall be valued in accordance with generally accepted
accounting principles.

(2) The following assets shall be valued at the market value of each
such asset

(a) securities listed on the Unified Exchange;

(aa) securities listed on a recognized stock market;

(ab) certificates of deposit ' acceptances, floating-rate notes and
other negotiable instruments that are commonly known as
commercial papers, the advertisement of which has been
authorized by the Securities Commission under section
4(2)(g) of the Protection of Investors Ordinance;

(ac) bills. certificates notes, paper or other debt instruments which

(i) are negotiable;

have a remaining term to maturity of not more than
10 years; and

(iii) are denominated and traded in Hong Kong dollars or in a
currency freely convertible into Hong Kong dollars;

(ad) securities issued by the governments of Australia, Canada,
the Federal Republic of Germany, Japan, the United Kingdom
or the United States of America;

(b) units in a unit trust and shares in a mutual fund corpora-
tion, which are authorized under section 15(1)(c) of the
Ordinance ;

(c) gold bullion.

(3) An interest, in immovable property shall be valued at market
value

(a)where that at interest is held by a member of the Exchange Company,
by the Exchange Company;

(b) in any other case, by an independent valuer acceptable to
the Commissioner.
L.N. 7/86. 27 of 1986. L.N. 404/87. L.N. 61/86. Citation. Interpretation. L.N. 404/87. 27 of 1986, s. 137. (Cap. 155.) (Cap. 155.) L.N. 404/87. Approved assets. L.N. 404/87. (Cap. 117.) L.N. 404/87. (Cap. 335.) L.N. 404/87. L.N. 404/87. (Cap. 289.) L.N. 404/87. L.N. 404/87. L.N. 404/87. Amounts receivable. L.N. 404/87. Liquid assets. L.N. 404/87. (Cap. 117.) L.N. 404/87. (Cap. 335.) L.N. 404/87. L.N. 404/87. (Cap. 289.) L.N. 404/87. L.N. 404/87. Ranking liabilities. L.N. 404/87. Valuation of approved and liquid assets. L.N. 404/87. L.N. 404/87. (Cap. 335.) L.N. 404/87. L.N. 404/87.

L.N. 7/86. 27 of 1986. L.N. 404/87. L.N. 61/86. Citation. Interpretation. L.N. 404/87. 27 of 1986, s. 137. (Cap. 155.) (Cap. 155.) L.N. 404/87. Approved assets. L.N. 404/87. (Cap. 117.) L.N. 404/87. (Cap. 335.) L.N. 404/87. L.N. 404/87. (Cap. 289.) L.N. 404/87. L.N. 404/87. L.N. 404/87. Amounts receivable. L.N. 404/87. Liquid assets. L.N. 404/87. (Cap. 117.) L.N. 404/87. (Cap. 335.) L.N. 404/87. L.N. 404/87. (Cap. 289.) L.N. 404/87. L.N. 404/87. Ranking liabilities. L.N. 404/87. Valuation of approved and liquid assets. L.N. 404/87. L.N. 404/87. (Cap. 335.) L.N. 404/87. L.N. 404/87.

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