UPDATE 1-Hong Kong watchdog flags IPO application failings, steps up scrutiny

The Securities and Futures Commission (SFC) and ⁠the Hong Kong stock exchange have asked 13 listing sponsors to conduct a comprehensive review and suspended the vetting of 16 listing applications deemed to have not met the required standard. The SFC and bourse issued a letter ​to listing sponsors in December, Reuters previously reported, in what the sector views as a rare warning ‍over applications not being up to standard.

Hong Kong's securities regulator said on Friday it had identified "serious deficiencies" in IPO listing ‌applications and was stepping up scrutiny, calling a halt to the vetting of some and telling banks to review their procedures. The Securities and Futures Commission (SFC) and ⁠the Hong Kong stock exchange have asked 13 listing sponsors to conduct a comprehensive review and suspended the vetting of 16 listing applications deemed to have not met the required standard.

The SFC and bourse issued a letter ​to listing sponsors in December, Reuters previously reported, in what the sector views as a rare warning ‍over applications not being up to standard. The SFC said on Friday it had requested that the banks which received the letters and a few others complete a "comprehensive review" of their procedures within three months.

It did not name the banks. Hong Kong, which ⁠topped the ‌rankings of fundraising hubs globally ⁠last year, faced the challenge of a surge in listings while banks have been stretched too thin to take up ‍the tasks.

"The gatekeeping role of sponsors in the listing process is critical to maintaining the quality of Hong Kong's ​capital market ... That role may have been eroded in their eager pursuit of deal volume," SFC CEO ⁠Julia Leung said in a statement. The SFC warned that it may restrict the business scope of sponsors whose work it views as ⁠continuing to be unsatisfactory, as well as the number of active applications they can handle.

Leung urged sponsors and external professional parties to avoid "over-commitment" in preparing listing applications. The SFC told sponsors that have designated ⁠any of their principals to simultaneously work on six or more active listing applications to provide a "rectification and resource ⁠plan".

It said all ‌individuals engaging in IPO sponsor work would now be subject to tightened examination requirements, as some banks were found to have allowed ineligible staff to do so.

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