(Q3, Q4, Q21 to Q24, Q27, Q29, Q32, Q34, Q36, Q47, Q48 and Q51 were updated on 26 January 2022)
(Q1, Q5, Q7 to Q9, Q11, Q13 to Q20, Q26, Q30, Q31, Q33, Q35, Q37 to Q46 and Q50 were either obsolete or elaborated in the Sponsor Guidelines and removed on 26 January 2022)
Q1 : FAQ removed on 26 January 2022
Q2 : What will be classified as sponsor work and IPO1 sponsor work?
Intermediaries2 will be regarded as carrying out sponsor work if they take up an appointment as a sponsor pursuant to the requirements of the Main Board or GEM3 Board of SEHK4. Intermediaries appointed as listing agents in relation to the listing of REITs5 on SEHK will also be regarded as carrying out sponsor work.Intermediaries acting as a sponsor for the IPO of an issuer will be regarded as carrying out IPO sponsor work.
Q3 : Can a firm with no track record act as a sponsor?
Yes. However, this firm is required to demonstrate that it can meet the eligibility criteria pursuant to the Sponsor Guidelines6 (i.e. sections 1 and 2). For example, the firm must be licensed for Type 6 regulated activity and has at least two Principals who have satisfied the eligibility criteria under paragraph 3.2.3 of the Sponsor Guidelines.
Q4 : Can intermediaries that are currently licensed or registered for Type 6 regulated activity but are subject to a condition restricting them from providing advice in respect of the Listing Rules7, act as a sponsor?
No. Only Type 6 intermediaries that are not subject to the above-mentioned condition or a condition restricting them to act as sponsor in respect of an application for the listing on a recognized stock market of any securities are allowed to act as a sponsor.
Q5 : FAQ removed on 26 January 2022
Q6 : When carrying out sponsor work, who should sign off on behalf of the sponsor, the various forms relating to the listing application and the sponsor’s declaration submitted to the Listing Division of SEHK?
Sponsors should refer to the specific requirements of the Listing Rules. Regardless of who signs the relevant forms on behalf of the sponsor, the Management8 of the sponsor is ultimately responsible for the work carried out by the sponsor, and for the supervision of the sponsor work. Such responsibilities cannot be delegated.
Q7 : FAQ removed on 26 January 2022
Q8 : FAQ removed on 26 January 2022
Q9 : FAQ removed on 26 January 2022
Q10 : There may be times when the sponsor does not have any sponsor mandates. Does this mean the sponsor is still required to maintain two Principals during those periods?
Yes. A sponsor should, at all times, have at least two Principals, with at least one of them being eligible to act as a Principal pursuant to Option 1 of the Sponsor Guidelines.
Q11 : FAQ removed on 26 January 2022
If there are joint sponsors on a particular transaction, does the team require separate oversight by Principals from each sponsor?
Yes. Each sponsor should have its designated Principal to supervise the transaction.
Additional sponsors appointed to advise a listing applicant will not diminish in any way the overall obligations and responsibilities of each sponsor in respect of the entire transaction, as required by all relevant rules, regulations, codes and guidelines.
Q13 : FAQ removed on 26 January 2022
Q14 : FAQ removed on 26 January 2022
Q15 : FAQ removed on 26 January 2022
Q16 : FAQ removed on 26 January 2022
Q17 : FAQ removed on 26 January 2022
Q18 : FAQ removed on 26 January 2022
Q19 : FAQ removed on 26 January 2022
Q20 : FAQ removed on 26 January 2022
Eligibility to act as Principal
Q21 : In order to be eligible to act as a Principal under Option 1 of paragraph 3.2.3 of the Sponsor Guidelines, should the appointee have played a senior role within a Transaction Team9, with responsibility for supervising other team members? What if there is more than one person who has played a substantial role in advising the listing applicant?
The term “substantial role” should be interpreted according to its ordinary meaning. A person who has played less than a leading supervisory role in an IPO transaction is generally not considered to have played a substantial role. Please refer to paragraph 3.2.6 of the Sponsor Guidelines for matters that would be taken into account in establishing whether an individual intending to act as a Principal has played a substantial role in an IPO. The sponsor should not attribute the experience of all the appointees of the firm to the same transaction when trying to meet the eligibility requirements as Principals under the Sponsor Guidelines.
Q22 : An appointed Principal is required to have played a substantial role in advising the listing applicant as a sponsor in at least two completed IPOs on the Main Board or the GEM Board of SEHK under Option 1 of paragraph 3.2.3 of the Sponsor Guidelines. In what circumstances will the SFC10 allow waivers in the event that the Principal has taken a short career break?
In exceptional circumstances, the SFC may allow dispensation from certain requirements regarding the eligibility of Principals, provided that such dispensation will not prejudice the overall protection of investors’ interests. The SFC will consider, among others, the firm’s business nature and model, supporting expertise and resources, compliance track record and systems, and the comparability of the overseas experience acquired by the Principal. Please see also paragraph 3.2.8 of the Sponsor Guidelines.
Q23 : International firms may transfer a senior member of their US or UK sponsor team, who has extensive experience participating in and overseeing sponsor work in international markets, to Hong Kong to lead the sponsor activities and appoint the individual as Principal under Option 2 of paragraph 3.2.3 of the Sponsor Guidelines. What kind of supporting documents will be regarded as relevant for the purpose of demonstrating that the individual has acquired the relevant experience? What if the said individual acquired such experience when he/she was acting for another group?
As Option 2 is largely concerned with circumstances in which international firms seek to transfer to Hong Kong senior staff who are highly experienced in the area of due diligence as a result of leading IPOs in Australia, the United Kingdom or the United States of America, we do not consider it necessary to dictate the number or recency of these IPOs. We would expect that the documentation submitted would, in all the circumstances, lead the sponsor to reasonably conclude that the proposed Principal has the relevant experience, as required under Option 2 of the Sponsor Guidelines. If the individual is from another group and the sponsor cannot satisfy itself that the individual’s experience meets the criteria as set out in Option 2, the individual should not be appointed as a Principal. This individual could still engage in sponsor work as a representative or responsible officer of the sponsor.
Q24 : If an individual, who formerly qualified as a Principal under Option 2, again seeks to become a Principal under Option 1, will he or she be required to demonstrate that he or she has fulfilled the eligibility criteria under Option 1?
Yes. The individual will be required to demonstrate that he or she has satisfied all of the eligibility criteria of Option 1 under paragraph 3.2.3 of the Sponsor Guidelines.
Q25 : Who would be eligible to act as a Principal under Option 3?
An Individual who has played less than a substantial role, but has participated actively and substantially in due diligence work in at least four completed IPO transactions in Hong Kong within the five years preceding the proposed appointment, may seek to be appointed as a Principal under Option 3.
Q26 : FAQ removed on 26 January 2022
Q27 : Does experience in the listing of REITs, in which an individual’s firm only participated as a financial adviser, count as relevant corporate finance experience?
Yes. Separately, if the firm acted as a listing agent of the REIT, and the individual participated in the capacity as described under paragraph 17 of the Code of Conduct11, the individual’s experience with regard to the said listing will be regarded as relevant IPO experience.
Q28 : What kind of supporting documents will the SFC regard as relevant for the purpose of demonstrating that the individual has acquired the relevant experience under Option 1 or Option 3? What if the individual completed an IPO with another sponsor?
We would expect that the documentation submitted would, in all the circumstances, lead the sponsor to reasonably conclude that the proposed Principal has the relevant experience, as required under the Sponsor Guidelines. Sponsors are expected to perform their own due diligence in verifying the information provided by new recruits and assessing whether they have satisfied the competence and experience requirements.
If an individual completed an IPO with another sponsor, the individual could seek to obtain from that sponsor a copy of the team structure chart that it submitted to the SFC with regard to that IPO.
Q29 : With regard to an individual seeking to become a Principal, will the SFC request the sponsor, to which the proposed Principal has previously been accredited, to provide supporting information or documents to demonstrate that the individual has played a substantial role in the IPO undertaken by that sponsor?
Sponsors are expected to perform their own due diligence in respect of the competence and experience of intended Principals and to satisfy themselves that any proposed Principal has satisfied the eligibility criteria.
The team structure chart that is submitted to the SFC may be utilised in assessing whether a proposed Principal has satisfied the eligibility criteria. Sponsors are expected to cooperate by providing team structure charts to each other for the purpose of facilitating such assessment. The sponsor should provide a copy of the team structure chart that is submitted to the SFC, to each of the individuals named in the chart.
FAQ removed on 26 January 2022
FAQ removed on 26 January 2022
Q32 : If an individual intends to be appointed as a Principal under Option 2 of paragraph 3.2.3 of the Sponsor Guidelines, can he or she complete a refresher course rather than taking HKSI12 Licensing Examination Paper 15?
Yes. As set out in paragraph 3.2.3(b)(iii) of the Sponsor Guidelines, the individual may complete a refresher course instead of passing the examination. In addition to Licensing Examination Paper 15, the HKSI has also developed a refresher course for these individuals. For details, please contact the HKSI (www.hksi.org).
Q33 : FAQ removed on 26 January 2022
Q34 : Why should the examination for an individual intending to be appointed as a Principal under Option 3 of paragraph 3.2.3 of the Sponsor Guidelines be taken within the six months preceding the individual’s appointment as a Principal?
As the nature of listing and sponsor work changes in line with market developments, the HKSI will constantly update the study manual relating to the relevant examination, as and when required. We consider it necessary for those who want to be appointed as a Principal under Option 3 to be up-to-date in respect of their knowledge of sponsor work and to have passed the relevant examination within the preceding six months.
Q35 : FAQ removed on 26 January 2022
Q36 : Does the examination requirement for licensed representatives or relevant individuals engaging in sponsor work apply to those Type 6 licence holders who only conduct corporate finance activities on non-IPO transactions? Is there an examination requirement for these other Type 6 licence holders?
The regulatory examination described under paragraph 4.1 of the Sponsor Guidelines applies to individuals seeking to be, or who are already licensed as, Type 6 representatives engaging in sponsor work. As a firm must be eligible to act as a sponsor in order to carry out compliance adviser work pursuant to section 2 of the Sponsor Guidelines, individuals engaging in compliance adviser work are also required to pass the relevant examination. Individuals engaging in Type 6 regulated activity other than sponsor or compliance adviser work, will not be affected by this examination requirement.
Q37 : FAQ removed on 26 January 2022
Q38 : FAQ removed on 26 January 2022
Q39 : FAQ removed on 26 January 2022
Q40 : FAQ removed on 26 January 2022
Q41 : FAQ removed on 26 January 2022
Q42 : FAQ removed on 26 January 2022
Q43 : FAQ removed on 26 January 2022
Q44 : FAQ removed on 26 January 2022
Q45 : FAQ removed on 26 January 2022
Q46 : FAQ removed on 26 January 2022
Team Structure Chart
Q47 : Does the SFC expect that all individuals named in the team structure chart to be submitted to the SFC in accordance with paragraph 17.11(c) of the Code of Conduct should have passed the sponsor examination or been exempted under paragraph 4.2 or 4.3?
All individuals named in the team structure chart who are engaging in Type 6 regulated activity are required to take the examination, unless exempted.
Q48 : With regard to the IPO team structure chart to be submitted to the SFC within two weeks after the first day of dealings, what is the expectation for large sponsor firms which have a complex reporting matrix?
The scale of a sponsor’s operation should not be a problem for the purpose of compliance with the requirement set out in paragraph 17.11(f) of the Code of Conduct. An intermediary, regardless of size, should have already have put in place its control and reporting lines in relation to the handling the IPO transaction.
Q49 : Does the SFC expect all individual transaction team members named in the Form A1 filed to SEHK to be included in the team structure chart of the IPO transaction in question?
Yes. Except for parties that do not belong to the sponsor, such as legal advisers, auditors and valuers, transaction team members named in the Form A1 filed to SEHK are the sponsor’s representatives who participated in the subject IPO transaction and should be included in the team structure chart of the IPO transaction. The chart should show the reporting line of each of these individuals within the team, together with their respective names, business titles and responsibilities and other details as specified in paragraph 17.11(f) of the Code of Conduct.
Q50 : FAQ removed on 26 January 2022
Q51 : To which department of the SFC should the sponsor send the team structure chart?
The sponsor should send the team structure chart to the Licensing Department of the SFC via WINGS, the SFC online platform for electronic forms and submission.
1 “IPO” means initial public offering.
2 “Intermediaries” means licensed corporations or registered institutions under the Securities and Futures Ordinance.
3 “GEM” means Growth Enterprise Market.
4 “SEHK” means The Stock Exchange of Hong Kong Limited.
5 “REITs” means real estate investment trusts.
6 “Sponsor Guidelines” refers to the “Additional competence requirements for corporations and individuals engaging in sponsor and compliance adviser work”, which is Appendix A to the Guidelines on Competence.
7 “Listing Rules” means the Rules Governing the Listing of Securities on the Stock Exchange (“Main Board Listing Rules”); references to the Main Board Listing Rules in this paragraph should be taken also to refer to the equivalent GEM Listing Rules.
8 “Management” includes a sponsor’s Board of Directors, Managing Director, Chief Executive Officer, Responsible Officers, Executive Officers and other senior management personnel.
9 “Transaction Team” means the staff appointed by a sponsor to carry out a listing assignment.
10 “SFC” means the Securities and Futures Commission.
11 “Code of Conduct” refers to the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.
12 “HKSI” means the Hong Kong Securities and Investment Institute.
Last update: 26 Jan 2022