With a view to further protecting investors in Hong Kong, the Hong Kong Stock Exchange and the Securities and Futures Commission (SFC) recently published a Consultation Paper on Regulation of Sponsors and Independent Financial Advisors.
In essence, the Exchange and the Commission aim to tighten the regulations of corporate finance advisers who wish to act as sponsors or independent financial advisers, whether to prospective applicants or listed issuers on either the main board or GEM. Highlights of the proposed changes to the Listing Rules are set out in the Consultation Paper and include: a requirement that sponsors and independent financial adviser firms and their directors and staff comply with a new code of conduct; a declaration in the prospectus by the sponsor and lead underwriter regarding the due diligence work they have performed in providing the Exchange with assurances on the completeness and accuracy of the contents; a declaration in the report by the independent financial adviser on the due diligence work it has performed in reaching its recommendation; a requirement that, in addition to sponsor firms and independent financial adviser firms, key individuals within the firm, namely, eligible supervisors, give personal undertakings to the Exchange to comply with the Listing Rules; and a further guidance to define whether a proposed sponsor or independent financial adviser may not be regarded as independent of a new applicant or listed issuer and, as such, be restrained from acting in that capacity.
The Exchange and the Commission envisage that such reform may impact significantly on certain market practitioners, as individuals who breach the proposed code of conduct will be placed on a blacklist and their names made public. The public is welcome to submit their comments to the Exchange or the Commission by July 31 2003 for detailed consideration.