Risk Disclosure Statement for Securities and ETFs
(ACN: 007268386 AFSL: 300767)
17 December 2021
This statement does not disclose all of the risks and other significant aspects of trading in financial products. In the light of risks, you should undertake such transactions only if you understand the nature of financial product such as securities and exchange-traded funds (ETFs) which you are buying or selling, and the extent of your exposure to risk. You should carefully consider whether trading in financial products is appropriate in the light of your experience, objectives, financial resources, and other relevant circumstances. If in any doubt, you should seek professional advice. Different financial products involve different levels of risk and in considering whether to trade or invest in financial products, you should be aware of the following:
i. Terms and Conditions of Trading/ Investing in Financial Products
You should read and understand the terms and conditions spelt out in the Client Agreement together with all disclosures, terms, conditions, rules, and regulations included on the Website, as the same may be amended, modified, supplemented, or replaced from time to time (collectively the "Terms"), which are referred to and govern the relationship between you and Tiger Brokers (AU) Pty Limited ("TBAU").
ii. Joint Account
Each joint account holder is jointly and severally liable for all debts incurred in a joint account. A joint account may be operated by no more than 2 individuals.
iii. Risk Associated with Trading/ Investing in Financial Products
a. Price Fluctuation
The price and value of any investment in financial products and the income, if any, from them, can fluctuate and may fall against your interest. An individual security may experience downward price movements and may, under some circumstances, even become valueless. An inherent risk of trading/investing in financial products is that losses may be incurred, rather than profits made, as a result of buying and selling such products.
b. Suspension or Restriction of Trading
Market conditions (e.g. illiquidity) and/or the operation of the rules of certain markets (e.g., the suspension of trading in any security because of price limits or trading halts) may increase the risk of loss by making it difficult or impossible to effect transactions or liquidate/offset positions. The placing of contingent orders, such as "stop-loss" or "stop-limit" orders, will not necessarily limit losses to intended amounts, as it may be difficult or impossible to execute such orders without incurring substantial losses under certain market conditions.
iv. Commission, Fees, Interest and Other Charges
You should obtain a clear explanation of all commissions, fees, interest and charges, including charges for the custody of your investments, and understand that these charges may affect your net profit (if any) or increase your loss. Upon entering into the Client Agreement with TBAU and accepting the Risk Disclosure Statement, you agree that you will be liable for these charges (as may be amended from time to time).
v. Assets Received or Held Outside Australia
Client assets received or held by the licensed person or registered outside Australia are subject to the applicable laws and regulations of the relevant overseas jurisdiction which may be different from Australia law. Consequently, such client assets may not enjoy the same protection as that conferred on client assets received or held in Australia.
vi. Transactions in Other Jurisdictions
Transactions on markets in other jurisdictions, including markets formally linked to the Australian market, may expose you to additional risks. Such markets may be subjected to rules and regulations that may offer different or diminished investor protection. Before entering into such trades, you should be aware of the rules relevant to the particular transactions; Australia's regulatory authority may be unable to compel the enforcement of the rules of regulatory authorities or markets in other jurisdictions where your transactions have been effected.
vii. Currency Risks
The potential for profit or loss from transactions on foreign markets or in foreign currency-denominated securities (traded locally or in other jurisdictions) will be affected by fluctuations in foreign exchange rates.
viii. Electronic Trading and Order Routing Systems
Trading through an electronic trading or order routing system exposes you to risks associated with system or component failure. In the event of system or component failure, it is possible that, for a certain time period, you may not be able to enter new orders, execute existing orders, modify or cancel orders that were previously entered or view the receipt of confirmations.
System or component failure may also result in loss of orders or order priority. Electronic trading system may experience outages or delays as the result of, among other events, power failures, programming failures, accessibility, volatile market conditions or heavy volume of trading which may result in delayed or slowed response time. You should be prepared and maintain alternative trading arrangements for order entry in the event that TBAU system is unavailable for any reason.
ix. Prohibition on Naked Short Selling
You may only sell instruments (e.g., shares) held on your securities trading account whether settled or unsettled at the time of sale. If you have entered into an instruction to sell an instrument that you do not own at the time of the sale and that is not held on your securities trading account whether settled or unsettled at the time of sale, you authorise TBAU to either cancel that instruction if it has not already been executed, or if the instruction has been executed, purchase the equivalent instrument in the equivalent quantity on your behalf and at your expense and you agree that you shall be liable for any associated fines or charges incurred by TBAU or you.
x. Deposited Cash and Property
You should familiarise yourself with the protection accorded to any money or other property which you deposit for domestic and foreign transactions, particularly in a firm's insolvency or bankruptcy. The extent to which you may recover your money or property may be governed by specific legislation or local rules. In some jurisdictions, property which had been specifically identifiable as your own will be pro-rated in the same manner as cash for purposes of distribution in the event of a shortfall.
xi. Non-Advisory Nature of Relationship
You should note and accept that TBAU does not provide any investment advisory services on any capital market products. TBAU will act on an execution-only basis and will not be providing any financial product advice to you. TBAU may provide factual information or research recommendations about a market, factual information or research recommendations about a company share, information about transaction procedures, information about the potential risks involved and how those risks may be managed. While information may be shared with you from representatives and/or agents of TBAU, it is to be used solely for educational purposes. You agree that you rely on your own judgement in making any investment decision and TBAU nor its representative is liable for any of such investment decision you made.
xii. Risk Disclaimer
a. All investments are risky. The historical data of any security or financial product cannot guarantee its future performance or return. Although diversified investment can help you spread risks, it does not help you to benefit or prevent you from losing money in a depressed market. There will always be potential losses in investing in securities or financial products. You need to consider your own investment objectives and risk tolerance before investing. When you use this product, it means that you have read, understood and accepted all the contents of this disclaimer, and that you have fully understood the possible risks and agreed to assume all the risks involved in using this product. It should be clear to you that the use of this product does not completely avoid investment risks, and TBAU does not take any responsibility for the losses and risks of your investment options.
b. TBAU and its affiliated companies will make every effort to ensure the authenticity, sufficiency, reliability, and accuracy of the information provided, but they cannot guarantee its absolute reliability and accuracy. All the information, data and material provided by TBAU will only be used as reference. You must carefully judge the accuracy of market prices, charts, comments and purchases or other information displayed in this product. TBAU will not take any responsibility for any loss caused by inaccuracy, omission of any content or your subjective reasons.
c. To the maximum extent permitted by applicable laws, TBAU shall not be liable for any loss or risk arising from the use or inability to use this product, including but not limited to direct or indirect personal damage, loss of business profits, interruption of trade, loss of business information or any other economic loss.
d. Trading in markets in other jurisdictions (including those with formal links to the local market) may involve additional risks. According to the regulations of these markets, the degree of protection you may have may vary or even decrease. Before proceeding with the transaction, you should first identify all the rules regarding the transaction you will be conducting. The regulatory authority in your current location may not be able to enforce the relevant rules in the jurisdictions or markets of the jurisdiction in which you have executed the transaction. TBAU is not responsible for any damage caused by the application of any rules.
xiii. Exemption of Liability for User Negligence or Breach of Contract
a. TBAU has the right to modify or change this disclaimer at any time, and the modified or changed terms will take effect immediately upon publication. If you continue to use this product after the disclaimer modification or change, you will be deemed to have read, understood and accepted the modified or changed terms. If you attempt to claim damages on the grounds of not reading, understanding, or accepting the modified or changed terms, TBAU will not bear any responsibility.
b. You must confirm that you know the functions of this product and the necessary operations to realize the functions of this product, and voluntarily choose to use TBAU's products and related services according to your own needs. For any loss caused by your personal negligence or operational mistakes during your use of TBAU's products and related services, TBAU will not take any responsibility.
c. If you use this product for any illegal purpose or in any illegal way and use TBAU's services to engage in any illegal acts or acts causing infringement of the rights and interests of others, resulting in losses to you or third parties, TBAU will not bear any liability for compensation.
d. The software or program used in this product and all contents on the product, including but not limited to texts, pictures, files, information, data, product structure and product design, shall be owned by TBAU or other rights holders who own its intellectual property rights according to laws, including but not limited to trademark rights, patents, copyrights, business secrets and proprietary technologies. If you use, modify, reproduce, publicly broadcast, convert, distribute, release, publicly publish, reverse engineer, decompile or reverse compile this product without the prior written consent of TBAU or other rights holders, TBAU will not bear any liability for compensation and has the right to demand that you bear the liability for infringement of intellectual property rights.
e. If the account password, personal information, and transaction data are leaked or your identity is counterfeited in the process of using this product, TBAU will not bear any liability for compensation.
xiv. Objective Disclaimer
a. This product has been closely tested in detail, but it cannot be guaranteed to be completely compatible with all hardware and software systems, and it cannot be guaranteed to be completely error-free. If there are incompatibilities and software errors, you can call TBAU's customer service at +61 02 9169 6999 (AU) for technical support, but TBAU will not be liable for any loss incurred by you in anyway.
b. TBAU will not be responsible for any loss caused by telecommunication system or internet network failure, computer failure or virus, information damage or loss, computer system problems or any other force majeure reasons (such as war, communication failure, natural disasters, strikes and government actions).
c. The service provided by this product may be interrupted or malfunctioned due to objective factors such as internet data transmission failure, interruption and delay, which causes a danger that this product function cannot be realized. Under such circumstances, if you suffer from losses due to delayed use or inability to use the services provided by this product, TBAU will not be liable for compensation. You are recommended to take reasonable and effective protective measures when you are using this product.
d. According to the needs of the company's operation, TBAU will publish and reprint the news and information provided by the cooperative company in this product and the content provider will be indicated when publishing and reprinting. Based on respect for the intellectual property rights of the content provider, TBAU will not conduct any substantive review over or make modification of the content provided by the content provider and does not guarantee the authenticity of the content. Please make your own judgment. If you think some content involves infringement or misrepresentation, please report your opinion to the provider of the content.
TIGER BROKERS (AU) PTY LIMITED
RISK WARNING STATEMENT FOR OVERSEAS-LISTED INVESTMENT PRODUCTS
OVERSEAS-LISTED INVESTMENT PRODUCTS
1. This statement does not disclose all the risks and other significant aspects of trading in an overseas-listed investment product. You should undertake such transactions only if you understand and are comfortable with the extent of your exposure to the risks.
2. You should carefully consider whether such trading is suitable for you in light of your experience, objectives, risk appetite, financial resources, and other relevant circumstances. In considering whether to trade or to authorise someone else to trade for you, you should be aware of the following:
Differences in Regulatory Regimes
1. Overseas markets may be subject to different regulations and may operate differently from approved exchanges in Australia. For example, there may be different rules providing for the safekeeping of securities and monies held by custodian or depositories. This may affect the level of safeguards in place to ensure proper segregation and safekeeping of your investment products or monies held overseas. There is also the risk of your investment products or monies not being protected if the custodian has credit problems or fails. Overseas markets may also have different periods for clearing and settling transactions. These may affect the information available to you regarding transaction prices and the time you have to settle your trade on such overseas markets.
2. Overseas markets may be subject to rules which may offer different investor protection compared to Australia. Before you start to trade, you should be fully aware of the types of redress available to you in Australia and other relevant jurisdictions, if any.
3. Overseas-listed investment products may not be subject to the same disclosure standards that apply to investment products listed for quotation or quoted on an approved exchange in Australia. Where disclosure is made, differences in accounting, auditing and financial reporting standards may also affect the quality and comparability of information provided. It may also be more difficult to locate up-to-date information, and the information published may only be available in a foreign language.
Differences in Legal System
1. In some countries, legal concepts which are practiced in mature legal systems may not be in place or may have yet to be tested in courts. This would make it more difficult to predict with a degree of certainty the outcome of judicial proceedings or even the quantum of damages which may be awarded following a successful claim.
2. The regulatory authorities of Australia will be unable to compel the enforcement of the rules of the regulatory authorities or markets in other jurisdictions where your transactions will be affected.
3. The laws of some jurisdictions may prohibit or restrict the repatriation of funds from such jurisdictions including capital, divestment proceeds, profits, dividends, and interest arising from investment in such countries. Therefore, there is no guarantee that the funds you have invested and the funds arising from your investment will be capable of being remitted.
4. Some jurisdictions may also restrict the amount or type of investment products that foreign investors may trade. This can affect the liquidity and prices of the overseas listed investment products that you invest in.
Different Costs Involved
1. There may be tax implications of investing in an overseas-listed investment product. For example, sale proceeds or the receipt of any dividends and other income may be subject to tax levies, duties, or charges in the foreign country, in Australia, or in both countries.
2. Your investment return on foreign currency-denominated investment products will be affected by exchange rate fluctuations where there is a need to convert from the currency of denomination of the investment products to another currency or may be affected by exchange controls.
3. You may have to pay additional costs such as fees and broker's commissions for transactions in overseas exchanges. In some jurisdictions, you may also have to pay a premium to trade certain listed investment products. Therefore, before you begin to trade, you should obtain a clear explanation of all commissions, fees, and other charges for which you will be liable. These charges will affect your net profit (if any) or increase your loss.
Counterparty and Correspondent Broker Risks
1. Transactions on overseas exchanges or overseas markets are generally affected by your Australian intermediary and/or Australian broker through the use of foreign brokers who have trading and/or clearing rights on those exchanges. All transactions that are executed upon your instructions with such counterparties and correspondent brokers are dependent on their respective due performance of their obligations. The insolvency or default of such counterparties and correspondent brokers may lead to positions being liquidated or closed out without your consent and/or may result in difficulties in recovering your monies and assets held overseas.
Political, Economic and Social Developments
1. Overseas markets are influenced by the political, economic, and social developments in the foreign jurisdiction, which may be uncertain and may increase the risk of investing in overseas-listed investment products.
TIGER BROKERS (AU) PTY LIMITED - RISK WARNING STATEMENT FOR PENNY STOCK
This disclosure contains additional important information regarding the characteristics and risks associated with the trading of small cap stocks ("penny stocks") or any emerging/growth companies that do not have the similar track records as other well-established companies.
What is a "Penny" Stock?
Generally, penny stocks refer to shares of companies which has low market capitalisation. Penny stocks are historically more volatile and less liquid than other large cap equities. For these and other reasons, penny stocks are considered to be speculative investments. Consequently, customers who trade in penny stocks should be prepared for the possibility that they may lose their entire investment. Before investing in a penny stock, you should thoroughly review the company issuing the penny stock. In addition, you should be aware of certain specific risks associated with trading in penny stocks.
Risks Associated with Penny Stocks
There are a number of risks of trading penny stocks, including the following:
You Can Lose All or Much of Your Investment Trading Penny Stocks. All investments involve risk, but penny stocks are among the most risky and are generally not appropriate for investors with a low risk tolerance. Many penny stock companies are new and do not have a proven track record. Some penny stock companies have little or no assets, operations, or revenues. Others have products and services that are still in development or have yet to be tested in the market. For these reasons therefore, penny stock companies have a greater risk of failure and those who invest in penny stocks have a greater risk that they may lose some or all of their investment.
Lack of Publicly Available Information. Most large, publicly traded companies may file periodic reports with the Regulators that provide information relating to the company's assets, liabilities and performance over time. In addition, these companies provide their financial information and operational results online. In contrast, information about penny stock companies can be extremely difficult to find, making it less likely that quoted prices in the market will be based on full and complete information about the company. Penny stock companies may also be more likely to be the subject of an investment fraud scheme, which may also increase risk for the investor.
No Minimum Listing Standards. Companies that offer shares of their stock on exchanges can be subject to stringent listing standards that require the company to have a minimum amount of net assets and shareholders. Again, this fact can contribute to the inherent risk associated with an investment in the shares of a penny stock company.
Risk of Lower Liquidity. Liquidity refers to the ability of market participants to buy and sell securities. Generally, the more demand there is for a particular security, the greater the liquidity for that security. Greater liquidity makes it easier for investors to buy or sell securities, so investors are more likely to receive a competitive price for securities purchased or sold if the security is more liquid. Penny stocks are often traded infrequently and have lower liquidity. You may therefore have difficulty selling penny stocks once you own them. Moreover, because it may be difficult to find quotations for certain penny stocks, they may be difficult, or even impossible, to price accurately.
Risk of Higher Volatility. Volatility refers to changes in price that securities undergo when they are being traded. Generally, the higher the volatility of a security, the greater its price swings. Due to their lower liquidity, penny stocks are subject to greater volatility and price swings. A customer order to purchase or sell a penny stock may not execute or may execute at a substantially different price than the prices quoted in the market at the time the order was placed. In addition, the market price of any penny stock shares you obtain can vary significantly over time. Penny stocks are prone to extremely high volatility since a small amount of capital and a few trades may suffice to move the price, and a slight movement in share price can lead to a significant percentage change.
Penny Stocks Can Be Subject to Scams. Penny stocks are frequent vehicles for scams and/or market manipulation due to their generally lower prices and less stringent listing requirements. You should be wary of advertisements, unsolicited e-mails, newsletters, blogs, or other promotional reports that emphasize the potential for large profits in penny stocks generally or certain penny stocks. These promotional materials are often used to manipulate or "pump up" the price of penny stocks before the promoter engages in selling a large volume of shares. Customers are therefore strongly encouraged to do their own due diligence with respect to any penny stock company they invest in and to not rely on any outside promotional reports or newsletters.
TIGER BROKERS (AU) PTY LIMITED - RISK WARNING STATEMENT FOR HONG KONG SECIRITIES
RISK OF SECURITIES TRADING
The prices of securities fluctuate, sometimes dramatically. The price of a security may move up or down, and may become valueless. It is as likely that losses will be incurred rather than profit made as a result of buying and selling securities.
RISK OF TRADING GROWTH ENTERPRISE MARKET STOCKS
1. Growth Enterprise Market (GEM) stocks involve a high investment risk. In particular, companies may list on GEM with neither a track record of profitability nor any obligation to forecast future profitability. GEM stocks may be very volatile and illiquid.
2. You should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.
3. Current information on GEM stocks may only be found on the internet website operated by The Stock Exchange of Hong Kong Limited. GEM companies are usually not required to issue paid announcements in gazetted newspapers.
4. You should seek independent professional advice if you are uncertain of or do not understand any aspect of this risk disclosure statement or the nature and risks involved in trading of GEM stocks.
RISK DISCLOSURE RELATING TO SECURITIES TRADING VIA SHANGHAI-HONG KONG STOCK CONNECT AND SHENZHEN-HONG KONG STOCK CONNECT
The following describes some of the risks and other significant aspects of trading the Shanghai Stock Exchange ("SSE") and Shenzhen Stock Exchange ("SZSE") securities via Hong Kong Connect through Tiger Brokers (AU) Pty Limited. In light of the risks, you should undertake such transactions only if you understand the nature of China Connect trading and the extent of your exposure to risk. You should carefully consider (and consult your own advisers where necessary) whether the trading is appropriate for you in light of your experience, objectives, financial resources, and other relevant circumstances.
You must observe the relevant laws and regulations of Mainland China and Hong Kong as well as the rules of the exchanges. You must accept and agree the aforesaid and the risks related to Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect, including but not limited to being liable or responsible for breaching the SSE Listing rules, SSE Rules, SZSE Listing Rules, SZSE Rules, and other applicable laws and regulations before giving instructions. Detailed information on trading via Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect can be referred to on HKEX (Hong Kong Exchanges and Clearing Limited)'s website.
1. Day trading: You are not allowed to carry out A-shares day trading. A-shares bought on trade day (T-day) can only be sold on or after T+1 day.
2. OTC trading: No over-the-counter ("OTC") or manual trades are allowed. All Shanghai-Hong Kong Stock Connect and Shenzhen- Hong Kong Stock Connect trading must be conducted on relevant participating China Connect exchanges (i.e., currently the participating exchanges are SSE/ SZSE. Tiger Brokers (AU) Pty Limited ("TBAU") is an intermediary of exchange participants.
3. Not protected by Investor Compensation Fund: You should note that, since Northbound or Southbound trading under Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect is through TBAU and TBAU is neither a licensed broker in Hong Kong nor Mainland China, you are not protected by Hong Kong Investor Compensation Fund or China Securities Investor Protection Fund.
4. Quotas used up: Once the daily quota for Northbound and Southbound trading is used up, acceptance of the corresponding buy orders will also be immediately suspended and no further buy orders will be accepted for the remainder of the day. Buy orders which have been accepted will not be affected by the using up of the daily quota, while sell orders will be continued to be accepted.
5. Difference in trading day and trading hours: You should note that, due to differences in public holidays between Hong Kong and Mainland China or other reasons such as bad weather conditions, there may be differences in trading days and trading hours in the two markets. Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect will only operate on days when both markets are open for trading and when banks in both markets are open on the corresponding settlement days. Therefore, it is possible that there are occasions when it is a normal trading day for the Mainland market, but investors cannot trade A- shares. You should take note of the days and the hours which Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect is open for trading and decide according to your own risk tolerance capability whether or not to take on the risk of price fluctuations in A-shares during the time when Shanghai-Hong Kong Stock Connect/Shenzhen-Hong Kong Stock Connect is not trading.
6. Arrangement under severe weather conditions and in cases of contingencies: In the case of any contingency, such as typhoon signal no.8 or above or Black Rainstorm warning issued in Hong Kong resulting in any suspension or delay of service, TBAU acting as an intermediary of exchange participants in Hong Kong shall have the right to cancel your orders in response to the above contingencies. Also, TBAU may not be able to send in your order cancellation requests in case of contingency such as when HKEX losses all its communication lines with SSE/SZSE. You should still bare the settlement obligation if the orders are matched and executed.
7. Restrictions on selling imposed by front-end monitoring: Pre-trade checking is applicable. If you want to sell A-shares through TBAU, the A-shares must be transferred to, and received in, your account with TBAU prior to market open on the day you are expecting to sell that relevant A-shares. If you fail to meet this deadline, you will not be able to sell such A-shares on that day.
8. The recalling of eligible stocks and trading restrictions: A stock which is on the list of eligible stocks for trading via Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect may be recalled from the list for various reasons and, in such event, the stock can only be sold but cannot be bought. This may affect your investment portfolio or strategies. You should therefore pay close attention to the list of eligible stocks as provided and updated from time to time by SSE, SZSE, and HKEX. Under the following circumstances, purchase of A shares via Northbound and/or Southbound trading will be suspended temporarily (but sale is permitted):
a. the A-shares cease to be constituent stocks of the relevant indices;
b. the A-shares are put under "risk alert"; and/or
c. the corresponding H shares of the A-shares cease to be traded on SEHK.
You should also note that such A-shares may be subject to the restriction of price fluctuation limits.
9. Transaction costs: In addition to paying trading fees and stamp duties in connection with trading of A-shares, you carrying out Northbound and/or Southbound trading via Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect should also take note of any new portfolio fees, dividend tax and tax concerned with income arising from stock transfers, which may be levied by the relevant authorities.
10. Mainland China's laws and regulations, foreign shareholding restrictions and disclosure obligations:
a. Under Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect, A-share listed companies and trading thereof are subject to the laws and regulations and disclosure obligations of the A-share market. Any changes in relevant laws or regulations may affect share prices. You should also take note of the foreign shareholding restrictions and disclosure obligations applicable to A-shares. You may be subject to restrictions on trading and retention of proceeds as a result of your interests and shareholdings in A-shares. You are responsible for compliance with the requirements of all relevant notifications, reports, and disclosure of interests.
b. Under the current Mainland China rules, when an investor holds up to 5% of the shares of a company listed on SSE or SZSE, the investor is required to disclose his/her interest within three working days during which he/she cannot trade the shares of that company. The investor is also required to disclose any change in his/her shareholding and comply with related trading restrictions in accordance with the Mainland China laws.
c. Under Mainland China laws and regulations, a single foreign investor's shareholding in a single Mainland China listed company shall not exceed 10% of the total issued shares. All foreign investors' shareholding in the A-shares of a Mainland China listed company is not allowed to exceed 30% of its total issued shares. You should ensure that the shareholding percentage complies with the relevant restriction. TBAU have the right to "force-sell" clients' shares upon receiving the force-sale notification from the HKEX.
d. You should also ensure that you fully understand the Mainland China rules and regulations in relation to short-swing profits as well as other disclosure obligations and ensure that they follow and complies with such rules and regulations accordingly.
e. According to existing Mainland China practices, Hong Kong and overseas investors as beneficial owners of A-shares traded via Shanghai-Hong Kong Stock Connect or Shenzhen-Hong Kong Stock Connect cannot appoint proxies to attend shareholders' meetings on their behalf.
11. Currency risks: Northbound and/or Southbound investments via Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect will be traded and settled in Renminbi (RMB). If you invest in A-shares with a local currency other than RMB, you will be exposed to a currency risk due to the need for the conversion of the local currency into RMB. During the conversion, you will also incur currency conversion costs. Even if the price of the RMB asset remains unchanged, you will still incur an exchange loss if RMB depreciates during the process of currency conversion.
The above summary only covers part of the risks related to Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect and any above-mentioned laws, rules and regulations are subject to change from time to time. You should visit the website of HKEX for updates and details for Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect.
If the aforesaid provisions are inconsistent with the rules and regulations of HKEX, SZSE and SSE, the rules and regulation of HKEX, SZSE and SSE shall prevail.
Northbound trading regulations and risks:
1. You must understand and fully comply with the applicable laws and regulation of Mainland China for Northbound trading and the applicable laws and regulation in Hong Kong. TBAU provides trading service only and shall not be under any obligation, or responsibly to provide advices on trading rules or market requirements on northbound trading. You are advised to refer to the HKEX and the SFC website for detailed information in relation to Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect to understand the relevant requirement (including the relevant quotas and etc.) and consult professional advisors if there is any query.
2. You must accept the risks concerned in Northbound trading, including but not limited to prohibition of trading certain SSE Securities, being liable or responsible for breaching the SSE/SZSE Listing Rules, SSE/SZSE Rules and other applicable laws and regulations.
3. TBAU has the right to forward your identification information to exchange participants and HKEX, who may transfer the relevant data to SSE/SZSE, for supervision and surveillance.
4. If the SSE/SZSE Rules are breached, or the disclosure and other obligations referred to in the SSE/SZSE Listing Rules or SSE/SZSE Rules are breached, SSE/SZSE has the power to carry out an investigation and may, through HKEX, require exchange participants and TBAU to provide the relevant information and materials (including your identification information) to SSE/SZSE through HKEX.
5. SSE and/or SZSE may request HKEX to require exchange participants and TBAU to issue warning statements (verbally or in writing) to you and/or other clients, and not to extend SSE and/or SZSE trading service to you and/or any other clients.
6. HKEX may upon SSE's or SZSE's request, require exchange participants and TBAU to reject orders from you. TBAU has the rights to execute the request.
7. TBAU, exchange participants, HKEX, HKEX Subsidiary, SSE, SSE Subsidiary, SZSE, SZSE Subsidiary and their respective directors, employees and agents shall not be responsible or held liable for any loss or damage directly or indirectly suffered by you or any third parties arising from or in connection with Northbound trading or the order routing system.
TIGER BROKERS (AU) PTY LIMITED - RISK WARNING STATEMENT FOR ETFS
MARKET RISK
Exchange Traded Funds (“ETFs”) are typically designed to track the performance of certain indices, market sectors, or groups of assets such as stocks, bonds, or commodities. ETF managers may use different strategies to achieve this goal, but in general they do not have the discretion to take defensive positions in declining markets. Investors must be prepared to bear the risk of loss and volatility associated with the underlying index/assets.
TRACKING RISK
Tracking errors refer to the disparity in performance between an ETF and its underlying index/assets. Tracking errors can arise due to factors such as the impact of transaction fees and expenses incurred to the ETF, changes in composition of the underlying index/assets, and the ETF manager's replication strategy. The common replication strategies include full replication/representative sampling and synthetic replication which are discussed in more detail below.
TRADING AT DISCOUNT OR PREMUIM
An ETF may be traded at a discount or premium to its Net Asset Value (NAV). This price discrepancy is caused by supply and demand factors and may be particularly likely to emerge during periods of high market volatility and uncertainty. This phenomenon may also be observed for ETFs tracking specific markets or sectors that are subject to direct investment restrictions.
FOREIGN EXCHANGE RISK
Investors trading ETFs with underlying assets not denominated in base currency of their accounts are also exposed to exchange rate risk. Currency rate fluctuations can adversely affect the underlying asset value, also affecting the ETF price.
LIQUIDITY RISK
Market Makers (MMs) are Exchange Participants that provide liquidity to facilitate trading in ETFs. Although most ETFs are supported by one or more MMs, there is no assurance that active trading will be maintained. In the event that the MMs default or cease to fulfill their role, investors may not be able to buy or sell the product.
COUNTERPARTY RISK INVOLVED IN ETFS WITH DIFFERENT REPLICATION STRATEGIES
1. Full replication and representative sampling strategies: An ETF using a full replication strategy generally aims to invest in all constituent stocks/assets in the same weightings as its benchmark. ETFs adopting a representative sampling strategy will invest in some, but not all of the relevant constituent stocks/assets. For ETFs that invest directly in the underlying assets rather than through synthetic instruments issued by third parties, counterparty risk tends to be less of concern.
2. Synthetic replication strategies: ETFs utilising a synthetic replication strategy use swaps or other derivative instruments to gain exposure to a benchmark. Currently, synthetic replication ETFs can be further categorized into various forms:
a. Swap-based ETFs
i. Total return swaps allow ETF managers to replicate the benchmark performance of ETFs without purchasing the underlying assets.
ii. Swap-based ETFs are exposed to counterparty risk of the swap dealers and may suffer losses if such dealers default or fail to honour their contractual commitments.
b. Derivative embedded ETFs
i. ETF managers may also use other derivative instruments to synthetically replicate the economic benefit of the relevant benchmark. The derivative instruments may be issued by one or multiple issuers.
ii. Derivative embedded ETFs are subject to counterparty risk of the derivative instruments' issuers and may suffer losses if such issuers default or fail to honour their contractual commitments.
Even where collateral is available to manage the credit risk, it is subject to the collateral provider fulfilling its obligations. There is a further risk that when the right against the collateral is exercised, the market value of the collateral could be substantially less than the amount secured resulting in significant loss to the ETF.
It is important that investors understand and critically assess the implications arising due to different ETF structures and characteristics.
TIGER BROKERS (AU) PTY LIMITED - RISK WARNING STATEMENT FOR LEVERAGED AND INVERSE ETFS
Tiger Brokers (AU) Pty Limited ("TBAU") prepares this disclosure to clients in order to provide additional information regarding the characteristics and risks associated with leveraged and inverse Exchange Traded Funds ("L&I ETFs"). In addition to providing this disclosure, TBAU strongly encourage clients to carefully review the specific L&I ETF's prospectus, PDS and/or other disclosure statements to understand the product's unique features, risks, fees and tax treatment before investing.
WHAT ARE LEVERAGED AND INVERSE ETFS
L&I ETFs seek to achieve short-term investment results that correspond to the magnified or inverse performance of their underlying benchmarks on a daily basis. L&I ETFs have three key features:
1. Daily Investment Objective – seek to achieve a multiple of their benchmark's daily performance, before fees and expenses;
2. Compounding Effects of Daily Returns – performance can deviate from the multiple of the benchmark's cumulative return when held for longer than one trading day; and
3. Use of Derivatives – invest a portion or all of their net assets in derivatives, typically futures or swaps.
LEVERAGED ETFS
As the name implies, leveraged ETFs seek to provide leveraged returns at multiples of the underlying benchmark or index they track. Leveraged ETFs generally seek to provide a multiple (e.g., 200%, 300%) of the daily return of an index or other benchmark for a single day excluding fees and other expenses. In addition to using leverage, these ETFs often use derivative products such as swaps, options, and future contracts to accomplish their objectives. The use of leverage as well as derivative instruments can cause leveraged ETFs to be more volatile and subject to extreme price movements.
INVERSE ETFS
Inverse ETFs, which are sometimes referred to as "short" funds, seek to provide the opposite of the single day performance of the index or benchmark they track. Inverse ETFs are often marketed as a way to profit from, or hedge exposure to, downward moving markets. Some inverse ETFs also use leverage, such that they seek to achieve a return that is a multiple of the opposite performance of the underlying index or benchmark (e.g., -200%, -300%). In addition to leverage, these ETFs may also use derivative instruments to accomplish their objectives. As such, inverse ETFs can be volatile and provide potential for significant losses.
RISKS ASSOCIATED WITH L&I ETFS
Like ETFs, the risks of L&I ETFs can include counterparty risk, market risk, tracking errors, trading at discount or premium, foreign exchange risk, and liquidity risk. In addition, L&I ETFs are complicated instruments that should only be used by sophisticated investors who fully understand the terms, investment strategy and risks associated with the L&I ETFs. In particular, clients should be aware of certain specific risks involved in trading L&I ETFs. These risks include, but are not limited to:
1. Use of Leverage and Derivative Instruments – Many L&I ETFs use leverage and derivative instruments to achieve their stated investment objectives. As such, these L&I ETFs can be extremely volatile and carry a high risk of substantial losses. These L&I ETFs are considered speculative investments and should only be used by investors who fully understand the risks and are willing and able to absorb potentially significant losses.
2. Most L&I ETFs Seek Daily Target Returns – Most L&I ETFs "reset" daily, meaning that they are designed to achieve their stated objectives on a daily basis. Due to the effect of compounding, the return for investors who invest for a period different than one trading day may vary significantly from the L&I ETF's stated goal as well as the target benchmark's performance. This is especially true in very volatile markets or if a leveraged ETF is tracking a very volatile underlying index. Investments in L&I ETFs must be actively monitored on a daily basis and are typically not appropriate for a buy-and-hold strategy.
3. Higher Operating Expenses and Fees – Investors should be aware that leveraged ETFs typically rebalance their portfolios on a daily basis in order to compensate for anticipated changes in overall market conditions. This rebalancing can result in frequent trading and increased portfolio turnover. L&I ETFs will therefore generally have higher operating expenses and investment management fees than other passive ETFs.
4. Tax Treatment of L&I ETFs May Vary – In some cases, L&I ETFs may generate their returns through the use of derivative instruments. Since derivatives are taxed differently from equity or fixed-income securities, investors should be aware that these L&I ETFs may not have the same tax efficiencies as other ETFs.