SFC sponsor regulation: The market response

Author: | Published: 11 May 2012

Investment banks in Hong Kong could lobby the city’s market regulator to scrap proposals to cap the number of sponsors on initial public offerings (IPO) to one per transaction. Market participants have branded the suggestion as overregulation.

Hong Kong’s Securities and Futures Commission (SFC) this week sought feedback on a series of proposed changes to sponsor regulation in the city in its long-awaited consultation paper. It aims to address regulatory concerns that sponsor work is falling short of expectations, and restore market confidence in IPOs, after a string of accounting scandals involving Chinese ListCos.

But bankers in the city have raised concerns over some of the more radical amendments put forward.

Sponsor cap

As stated in the SFC’s paper, its proposal to restrict the number of sponsors on any single IPO aims to address what the regulator perceives as fragmentation of work, gaps and overlaps caused...