SFC concludes consultation on regulation of IPO sponsors

12 Dec 2012

The Securities and Futures Commission (SFC) has published today conclusions on proposals concerning initial public offering (IPO) sponsors.

Taking into account respondents' comments, the SFC has refined a number of original proposals while adopting most of the key reforms, which aim to ensure that sponsors thoroughly understand any company aspiring to access Hong Kong's public capital markets before a listing application is made. The emphasis is on early, comprehensive due diligence and a properly drafted prospectus to accompany the application.

"The changes, along with a streamlined regulatory process, will incentivise sponsors to raise standards, pick the right deals and manage them well which should in turn reduce risks for investors and all those involved in IPOs," said SFC Chief Executive Officer Mr Ashley Alder.  "Although we are now experiencing lower IPO volumes these reforms will underpin market confidence during all market cycles."

Mr Alder further noted that "a high-quality application should mean that the regulatory commenting process is shorter and less intensive." The SFC and the Stock Exchange of Hong Kong Ltd (SEHK) will work on measures to streamline this process so that companies can be listed more efficiently.

The proposals are intended to enable and incentivise sponsors to take a responsible, proactive and constructive role when leading IPOs and, overall, maintain investor confidence in Hong Kong’s IPO market.

Important aspects of the reforms include:

1.    Prospectus liability

The SFC recommends that:

2.    Publication of application proof

3.    Reliance on experts and meaningful Management Discussion and Analysis (MD&A)

4.    Initiatives to enhance sponsors’ role

To ensure that a sponsor's ability to carry out its "gatekeeping" role is not undermined by competitive tensions, the SFC shall require that:

The new requirements will apply to listing applications submitted on or after 1 October 2013. Related amendments to the SFC’s Corporate Finance Adviser Code of Conduct and Sponsor Guidelines will also become effective on the same day. Legislative amendments will follow a separate timetable. The Stock Exchange will make appropriate changes to the Listing Rules with a view to bringing the revised rules into force when the requirements become effective.


Page last updated : 12 Dec 2012