Tensions rise over HK IPO power of attorney shift

Author: Tom Young | Published: 25 Sep 2015

The practice of junior syndicate banks signing away power of attorney (POA) privileges on Hong Kong IPOs [initial public offerings] is causing increased concern among counsel in the city.

The trend, which began in November 2012 on Chinese state-owned enterprise (SOE) PICC’s IPO, and has now become the market norm, is unique to Hong Kong. It involves junior underwriting syndicate members, including joint bookrunners, executing broad and irreversible POA in favour of global coordinators in the early stages of IPO planning.

The practice is increasingly taking place immediately upon banks being invited to join the syndicate, and it prevents the deals’ junior banks from carrying out basic due diligence or even determining the principal commercial terms of the transaction.

Counsel are concerned. "There’s a real sense of urgency to take action," said Stuart Rubin, partner at Ashurst in Hong Kong. "The...