Hong Kong regulator ramps up warnings over poor IPO filings
Securities and Futures Commission flags that teams are unfamiliar with regulatory requirements and lack the experience to handle applications
[HONG KONG] Hong Kong’s market regulator stepped up warnings to investment banks over filing sloppy applications for share sales as listings boom.
In a circular issued on Friday (Jan 30), the Securities and Futures Commission (SFC) said that it is concerned that a growing number of teams at the most active sponsors are unfamiliar with regulatory requirements, and lack the experience and resources to handle applications.
It also found that some principal bankers have insufficient capacity to supervise, and show an over-reliance on lawyers and auditors.
The SFC is now requiring all sponsoring banks to submit the names and numbers of principal bankers, and how many active listings they are working on within two weeks.
Anyone supervising or participating in more than six deals will be regarded as “lacking adequate or appropriate resources”, based on the circular.
It said that the application documents should not exceed 300 pages in total, among other requirements.
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SFC chief executive officer Julia Leung said: “The gate-keeping role of sponsors in the listing process is critical to maintaining the quality of Hong Kong’s capital market, and sustaining investor confidence in new listings that will hold up through all market cycles.
“That role may have been eroded in their eager pursuit of deal volume.”
This is at least the second warning from the authority in less than two months over the quality of initial public offering (IPO) applications, as the city last year experienced the highest fundraising volume in four years and the busiest January on record.
The 13 sponsors who were warned in December, and those with principals taking care of more than six IPOs, “should expect the SFC to conduct on-site thematic inspections of their sponsor work and resources in the near future”, the SFC added.
The Chinese regulators are also growing concerned and are weighing tighter rules to ensure that there are only high-quality issuers.
Bonnie Chan, Hong Kong’s stock exchange chief executive officer, said in January that quality was “non-negotiable”, and warned of disciplinary action where appropriate.
Apart from the bankers, the SFC is requiring the sponsors to report the full list of individuals working on IPO applications who have not recently passed certain securities qualification exams.
As at Dec 31, 2025, the vetting of 16 listing applications has been suspended. BLOOMBERG
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