LCQ 2: Use of Language in Completing IPO Application Forms (5
Press release
LCQ 2: Use of language in completing IPO application forms
Wednesday, January 5, 2005
Following is a question by the Hon Mrs Selina Chow and a reply by the Secretary for Financial Services and the Treasury, Mr Frederick Ma, in the Legislative Council today (January 5):
Question :
The application forms for The Link Real Estate Investment Trust (The Link REIT), which was offered for sale to the public last month, specified that except for the Chinese names, applicants should complete the forms in English; otherwise their applications might be rejected. Such a practice has caused inconvenience to some members of the public who intended to subscribe for The Link REIT. According to the Administration's reply to a relevant question raised in this Council in April 2001, the Securities and Futures Commission would discuss with members of the Federation of Share Registrars and market participants to explore possible means to allow investors to complete subscription forms in Chinese in the future. In this connection, will the Government inform this Council:
(a) given that it has been more than three and a half years since the Administration replied to the above question in April 2001, of the reasons for the failure of the authorities concerned to make arrangements to allow investors to complete the subscription forms in Chinese;
(b) given that stakeholders of the securities sector expected a large number of retail subscribers of The Link REIT, whether the authorities concerned had considered allowing such retail subscribers to complete the application forms for The Link REIT in Chinese; and
(c) given that the authorities concerned announced last month that the listing of The Link REIT had been put on hold, whether they will consider adopting measures to allow members of the public to complete subscription forms in Chinese when they arrange for the listing of The Link REIT and other public assets in the future?
Reply:
Madam President,
(a) First of all, I would like to clarify that existing Listing Rules and the Securities and Futures Commission (SFC)'s regulations do not impose any specific requirements on the language to be used in the completion of share application forms. In fact, these documents are agreements between the issuers and the applicants. The prevailing market practice is to require investors to complete the application forms in English.
Since 2001, the SFC has on many occasions discussed the issue of allowing the use of Chinese in completing the IPO application forms with the Federation of Share Registrars as well as various financial intermediaries and market participants involved in the IPO process.
However, due to the legal and technical difficulties set out below, the industry has considered it not technically feasible at this stage to move towards using Chinese characters to complete the IPO application forms:
(i) Many of the companies listed in Hong Kong are incorporated overseas. According to the laws of many overseas jurisdictions, the names on the register of members (shareholders) of the company must be maintained in English. So, it is necessary for the issuers to obtain such information in English from the subscribers.
(ii) Many of the computer systems used by the market operators and intermediaries who are involved in the IPO process and the subsequent share transfer activities (e.g. share registrars, brokers, banks, etc) can, at present, only process information in English. To allow subscribers to submit application forms in Chinese, it is necessary for the computer systems of market operators and intermediaries to be changed to allow the processing of the Chinese data in applications forms. It is a matter of commercial decision for market operators and intermediaries as to whether investment should be made in changing their computer systems having regard to the perceived investors' needs and the costs involved.
We understand that some share registrars have begun looking into Chinese language processing capabilities and the SFC will continue to liaise with the industry on this issue.
I also wish to point out that, in addition to the completion and submission of the application forms by themselves, investors have other means to lodge an application to participate in an IPO. For instance, they can apply through a broker or a bank of their choice who will lodge an application on their behalf, or they can open an investor participant account with and apply through the Hong Kong Exchanges and Clearing Limited.
(b) According to the SFC, the issue of the language for completing the IPO application forms was discussed with the Joint Global Coordinators and other stakeholders involved in the Link REIT IPO process. Due to the aforementioned legal and technical difficulties, the industry considered it not technically feasible at this stage to move towards allowing the filling of IPO application forms in Chinese. Nevertheless, in order to facilitate the participation of the investing public, the SFC specifically asked the Joint Global Coordinators to ensure that where IPO applications were collected, there were measures, resources and arrangements in place to assist applicants in the completion of application forms. At all of the receiving banks, trained staff were available to provide assistance to those investors who require such help to complete application forms in English.
(c) The SFC intends to reiterate its request to the Joint Global Coordinators that they should ensure that similar measures, resources and arrangements to assist applicants in filling IPO application forms in English would be put in place during the coming listing of the Link REIT, and urge them to consider how such measures could be further strengthened to provide investors with more convenience. The SFC will continue to liaise with the market operators and other concerned parties on ways to allow the completion of application forms in Chinese.
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