Hong Kong tightens rule for IPO sponsors

The new regulation will apply to IPO applications submitted on or after October 1, 2013. Criminal liability will be determined by whether an IPO sponsor "knowingly or recklessly" signs off on a prospectus containing a false statement. However, companies instead of individual bankers will be subject to the increased liability.

The regulator started the consultation in May 2012 and received 71 written responses from the investment community including investment bankers, legal advisors, accountants and corporate governance houses. Some industry participants have expressed worries that the new change will require higher costs of due diligence and may impact the city's IPO volume.

"There was quite a lot of pushback from sponsor firms about increased liability on sponsor firms, which is not unexpected, but fundamentally we followed through on the proposals," said SFC CEO Ashley Alder, cited by Reuters.

The CEO added that although Hong Kong is experiencing lower IPO volumes, the regulatory reform will underpin market confidence during all market cycles.

The newly-published recommendations on prospectus liability are not legally binding. The SFC still needs to apply to the government and put the proposals before the Legislative Council.

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• Topics
• Greater China
• Regulation
• Hong Kong (China)
• IPO
• regulation