TIDMHSBA
RNS Number : 7802T
HSBC Holdings PLC
10 January 2017
The following is the text of an announcement released to the
Stock Exchange of Hong Kong Limited on 10 January 2017 pursuant to
rule 13.43 of the Rules Governing the Listing of Securities on The
Stock Exchange of Hong Kong Limited:
Hong Kong Exchanges and Clearing Limited and The Stock Exchange
of Hong Kong Limited take no responsibility for the contents of
this document, make no representation as to its accuracy or
completeness and expressly disclaim any liability whatsoever for
any loss howsoever arising from or in reliance upon the whole or
any part of the contents of this document.
10 January 2017
(Hong Kong Stock Code: 5)
HSBC HOLDINGS PLC
WAIVER FROM STRICT COMPLIANCE WITH RULES 10.06(1) TO (5)
Background
A number of subsidiaries of HSBC Holdings plc (the "Company")
deal in shares of the Company in the ordinary course of business
such as equity trading and brokerage. Under English law,
subsidiaries are generally restricted from holding shares in their
parent company. However, for some years, English law has also
provided an exemption to allow subsidiaries to hold shares in their
parent company where such shares are held in the ordinary course of
business as an intermediary (the "Intermediaries Exemption").
Rules 10.06(1) to (5) of the Rules Governing the Listing of
Securities on the Stock Exchange of Hong Kong (the "Listing Rules")
also impose obligations on subsidiaries when purchasing shares in
their parent company. However, as an English incorporated company,
the Company has held a number of waivers allowing certain of its
subsidiaries to conduct this activity in order to take advantage of
the Intermediaries Exemption. Waivers also apply to the purchase of
contingent convertible securities ("CCSs") issued by the Company.
The Company has requested the Stock Exchange of Hong Kong Limited
(the "Stock Exchange") to update those waivers and that updated
request has been granted.
The Intermediaries Exemption Waiver
The Stock Exchange has granted a waiver from Rules 10.06(1) to
(5) to the Company in respect of any purchases made by HSBC
Securities (USA) Inc., HSBC Bank plc, The Hongkong and Shanghai
Banking Corporation Limited and HSBC France (collectively, the
"Relevant Subsidiaries") of the Company's shares (as defined in
Rule 10.06(6)(c)) which are made in the ordinary course of business
of the respective Relevant Subsidiaries as an intermediary in
relation to the following activities:
(i) client facilitation trading;
(ii) derivatives hedging;
(iii) equity index arbitrage;
(iv) stock borrowing and lending activity; and
(v) collateral for margin finance activities and other lending,
(collectively, the "Intermediaries Activities").
Reasons for the Intermediaries Exemption Waiver
Since the Relevant Subsidiaries operate businesses which involve
trading in shares, the restrictions under Rules 10.06(1) to (5)
impose a disproportionate burden when such subsidiaries deal in
shares of the Company in the ordinary course of their business. The
Intermediaries Exemption Waiver allows these Relevant Subsidiaries
to take advantage of the Intermediaries Exemption. The
Intermediaries Activities to which the Intermediaries Exemption
Waiver relates are activities which the Relevant Subsidiaries
undertake in the ordinary course of their business which involves
them holding positions in the Company's shares from time to time.
If the Relevant Subsidiaries were not able to hold positions in the
Company's shares, their ability to offer equity trading services to
customers would be significantly impaired.
Terms of the Intermediaries Exemption Waiver
The Intermediaries Exemption Waiver is subject to the following
conditions:
(i) the Company will report the net long positions held by the
Relevant Subsidiaries in the Company's shares (together with the
net long positions in the Company's CCSs held pursuant to the CCS
Waiver (as defined below)) to the Stock Exchange and the Securities
and Futures Commission (the "SFC") when the aggregate of such net
long positions at the end of a trading day exceeds 0.5% of the
Company's issued shares. Such report should be sent to the Stock
Exchange and the SFC by the opening of the second trading day in
Hong Kong;
(ii) the Relevant Subsidiaries will abide by all regulatory
requirements applicable to their Intermediaries Activities; and
(iii) the Company will announce the details of and reasons for
the Intermediaries Exemption Waiver.
The Intermediaries Exemption Waiver replaces the waivers
previously granted to the Company on 30 July 1992, 29 November
2002, 18 September 2003 and 26 April 2004 in relation to Rules
10.06(1) to (5) in their entirety.
The CCS Waiver
The Stock Exchange has granted a waiver from Rules 10.06(1) to
(5) to the Company in respect of any purchases of the Company's
CCSs made in connection with the distribution, acquisition, holding
and disposal of the CCSs by the Relevant Subsidiaries, including
their roles as manager, global co-ordinator, bookrunner,
stabilising manager and/or underwriter of any issuance of CCSs and
any market-making activity in the secondary market or similar
activity intended to facilitate liquidity in the CCSs.
Reasons for the CCS Waiver
CCSs are debt securities that benefit from a particular
regulatory capital treatment under European Union legislation. The
CCSs may, in certain prescribed circumstances, convert into
ordinary shares of the Company. Accordingly, the CCSs are treated
as constituting "shares" for the purpose of Rule 10.06. The
acquisition by the Relevant Subsidiaries of any CCSs might
therefore trigger the restrictions described above under Rules
10.06(1) to (5).
It is common for a financial institution which is issuing debt
securities to support the issuance by acting (through its relevant
licensed subsidiary or subsidiaries) in the above-mentioned
managing, underwriting and/or market-making roles for its own debt
securities issuance. This is because the issuer's own group would
be well placed to devote sufficient resources to facilitating
liquidity in its debt securities and promoting an orderly market.
The CCSs are a bespoke form of debt security, which because of
their regulatory capital treatment would typically only be issued
by financial institutions. Accordingly, in order to meet market
expectations for the issuance, the Relevant Subsidiaries may act in
such managing, underwriting and/or market-making roles for any
issuances of CCSs, and may distribute, hold, acquire and/or dispose
of CCSs in such capacities.
The distribution, holding, acquisition and disposal of any CCSs
by the Relevant Subsidiaries are therefore primarily intended as a
means to distribute the CCSs to third parties and to promote
liquidity in the CCSs by providing some inventory to fulfil a
market-making function. The amount of CCSs which may be held by the
Group pursuant to market-making activities will be subject to
certain limits as agreed with the UK Prudential Regulation
Authority (the "PRA") from time to time. Current regulations
provide that, for Additional Tier 1 Capital (including CCSs), those
limits may not exceed the lower of (i) 10% of the amount of the
relevant issuance or (ii) 3% of the amount of total outstanding
Additional Tier 1 Capital Accordingly, the CCS Waiver permits the
Relevant Subsidiaries to undertake the above activities in respect
of the CCSs without HSBC complying with the strict requirements of
Rules 10.06(1) to 10.06(5).
Terms of the CCS Waiver
The CCS Waiver is subject to the following conditions:
(i) the Company will report the net long positions held by the
Relevant Subsidiaries in the Company's CCSs (together with the net
long positions in the Company's shares held pursuant to the
Intermediaries Exemption Waiver) to the Stock Exchange and the SFC
when the aggregate of such net long positions at the end of a
trading day exceeds 0.5% of the Company's issued shares. Such
report should be sent to the Stock Exchange and the SFC by the
opening of the second trading day in Hong Kong;
(ii) the Relevant Subsidiaries will abide by all regulatory
requirements applicable to them in respect of the distribution,
acquisition, holding and disposal of the CCSs; and
(iii) the Company will announce the details of and reasons for the CCS Waiver.
For the purposes of the CCS Waiver, a CCS is any security issued
by the Company or any of its subsidiaries which constitutes
Additional Tier 1 Capital under relevant banking regulations, the
terms of which have been approved by the PRA and which are
convertible into shares of the Company if certain contingent
conditions are met (which would likely include the Company's Common
Equity Tier 1 Capital Ratio or other capital ratio falling below a
certain specified level as approved by the PRA or other relevant
banking regulator, or the Company otherwise being determined not to
be viable). The CCS Waiver applies to all CCSs issued to date, and
to CCSs which may be issued by the Company in future.
For and on behalf of
HSBC Holdings plc
Ben JS Mathews
Group Company Secretary
The Board of Directors of HSBC Holdings plc as at the date of
this announcement are: Douglas Flint, Stuart Gulliver, Phillip
Ameen , Kathleen Casey , Laura Cha , Henri de Castries , Lord Evans
of Weardale , Joachim Faber , Sam Laidlaw , Irene Lee , John Lipsky
, Rachel Lomax , Iain Mackay, Heidi Miller , Marc Moses, David Nish
, Jonathan Symonds , Jackson Tai , Pauline van der Meer Mohr and
Paul Walsh .
Independent non-executive Director
This information is provided by RNS
The company news service from the London Stock Exchange
END
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