New Sponsor Regime Starts Soon

30 Dec 2006

The SFC is pleased to announce that the new sponsor regulatory regime will become effective on 1 January 2007.

Mrs Alexa Lam, SFC’s Acting Chief Executive Officer and Executive Director of Intermediaries and Investment Products, said: “The new sponsor regime aims to enhance the quality of Hong Kong’s financial market and investor protection, therefore, only those intermediaries that have met the stringent eligibility requirements are allowed to continue their sponsor/compliance adviser work.”

Licensing condition has been imposed on 183 Type 6 intermediaries, meaning that these intermediaries are restricted from acting as sponsors/compliance advisers from 1 January 2007 (Note 1). Information about whether a Type 6 intermediary has been imposed with the licensing condition is available on the Public Register of Licensed Persons and Registered Institutions on the SFC website.

Type 6 intermediaries that have not been imposed with the licensing condition are either intermediaries that have met the eligibility criteria prescribed in the Guidelines for Sponsors and Compliance Advisers (Sponsor Guidelines) and have been notified by the SFC confirming their eligibility to act as sponsors/compliance advisers, or those that have submitted representations after receipt of LOMs. The SFC is in the process of carefully assessing their representations.

For those that have yet to meet the Sponsor Guidelines but have submitted representations, the SFC wishes to remind that while they may take up new sponsor/compliance adviser work, they must ensure that the interest of their clients would not be compromised, given that they may ultimately be unable to act as sponsors. In fact, accepting new work after the receipt of LOM may cast doubt on an intermediary’s fitness and properness.

The SFC also reminds intermediaries that have submitted representations on LOMs that, for fairness to their clients, they should fully inform and explain the implications to their clients.

Meanwhile, the SFC also wishes to caution that, given the uncertain sponsor status of intermediaries issued with LOMs, prospective issuers should exercise care when selecting their sponsors. Prospective issuers should at a minimum enquire with these firms if they have received notification from the SFC confirming their eligibility as sponsors or they have been issued an LOM. For their own protection, prospective issuers may wish to understand the concerns giving rise to the LOMs.

The SFC has issued a circular to Type 6 intermediaries today to assist them to understand the process.



1. These intermediaries include those who had indicated that they would not act as sponsors and those who failed to make representations after receipt of Letters of Mindedness (LOMs), issued by the SFC informing them of its intention to impose the licensing condition restricting them from acting as sponsors from 1 January 2007. Please see SFC press releases dated 15 December, 5 October and 5 September 2006.

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