We don't want to jail bankers, SFC chief says
The Securities and Futures Commission's controversial proposal to tighten rules covering listing sponsors is not intended to put bankers in jail but to encourage them to do a better job, the regulator's chief said.
'We are not on a mission to put bankers in jail,'' said Ashley Alder, chief executive of the SFC, adding he did not intend to 'see bankers exchanging their suits for the less attractive clothing issued by the Correctional Services Department'. Alder said the proposals were driven by the deficiencies seen in some sponsors' work over the past few years. 'What we want to do instead is to improve the quality of due diligence done by sponsor firms,'' he said in a luncheon speech yesterday.
'Our objective is to change behaviour to provide greater assurance that prospectuses contain quality information that allows investors to make informed decisions.'
The SFC released a consultation paper two weeks ago suggesting measures to tighten curbs on investment banks and brokers acting as sponsors to help companies go public. The proposals, subject to a two-month consultation period, stirred up controversy as they include tough measures such as adding criminal liability to sponsors that fail to ensure information in the listing prospectus is accurate.
The SFC also suggests sponsors should complete the majority of due diligence work on companies before submitting an advanced draft prospectus to the stock exchange.
It also means sponsors cannot just place blind reliance on accountants and valuers. Alder said this does not mean sponsors should 'audit the auditors', but they should access the financial statements of auditors to see if they are consistent with the information the sponsors know about the applicants.
Some big investment banks have hired lawyers to negotiate with the SFC about the criminal liability recommendations. Alder said 'a criminal prosecution should only be pursued in serious cases reflecting a community expectation abut conduct meriting criminal punishment'.
He added: 'If individuals actively assist in the inclusion of untrue statements in a prospectus, and if it's a serious case, they could be justifiably subject to criminal liability under the general law.''
Some firms said the tighter proposals may drive away some companies to list in other markets.
But Alder said: 'My view is that this is not a real risk and if some who can't match up to reasonable expectations of competence and integrity go elsewhere that is not a bad thing.'
