Banks seek talks on new IPO rules

PUBLISHED : Friday, 18 May, 2012, 12:00am
UPDATED : Friday, 18 May, 2012, 12:00am


Major investment banks want a separate consultation with the Securities and Futures Commission over its proposal to require the imprisonment of sponsors, such as brokers or bankers, who fail to ensure the accuracy of IPO documents.

Banks have generally been positive about the SFC's proposed amendments to its code of conduct, but want a separate venue to discuss the issue of sponsors' liability, says Martin Rogers. Sources told the South China Morning Post Rogers is one of two Hong Kong-based lawyers who have been asked to advise more than two dozen banks on their responses to the SFC.

Clifford Chance counsel Rogers and Bonnie Chan from Davis Polk have been called on to advise banks such as Morgan Stanley, Goldman Sachs, JP Morgan, China International Capital Corporation (CICC), along with Japan's Nomura, Mizuho and Daiwa, on the SFC's consultation paper, according to people from the banking industry who refused to be identified as they are not authorised to speak to the media.

The banks had an initial meeting with the lawyers earlier this week to discuss the proposed SFC changes, including plans to make it a criminal offence to mislead investors in clients' prospectuses.

The markets watchdog last week launched a two-month consultation on the proposals to tighten its scrutiny of sponsors, which, like referees, must ensure that a client's listing documents are not misleading. The consultation will close on July 6.

SFC chief executive Ashley Alder said last week that there was no definite timetable for implementing the proposed regulatory changes.

'It is not a simple question as to how you apportion liability in different circumstances between different stakeholders in a deal,' Rogers told the Post.

The listing process was a 'collaborative process', he said, involving different stakeholders, from auditing firms to company directors.

Rogers also questioned the viability of a proposal to limit the number of sponsors in a single deal, saying investors were more comfortable with transactions involving multiple sponsors. Financial industry executives in Hong Kong also said this limit would have implications on investment banking fee structures.

The lawyer challenged, too, the SFC's suggestion that the first draft of a listing document should be released to the public, saying firms could suffer from releasing sensitive commercial data should market conditions force them to delay their IPO.

The executives also raised concerns about the co-ordination between SFC and other bodies - including the Law Society and Financial Reporting Council - in delineating the responsibilities of sponsors.