New rules to cut listing sponsors
Almost two-thirds of investment banks in the city will be banned from acting as listing sponsors because they are either unwilling or unable to meet stricter requirements being imposed from the beginning of next year, according to the Securities and Futures Commission.
Of the 267 firms with a licence to sponsor initial public offerings, 90 made submissions indicating that they intended to continue to do so under the regime next year while 160 companies indicated that they would not.
Seventeen firms have not yet responded to the commission's solicitation.
However, during the assessment of the submissions by the 90 firms that wish to act as listing sponsors, the securities watchdog found some may not meet the requirements under the new regulatory regime, including the requirements regarding competence and experience.
Under the new rules, the commission will require sponsors to have capital of HK$10 million and at least two principal officers with a minimum of five years' corporate finance experience.
Investment banks that bring new companies to the stock market are also liable to lawsuits brought by shareholders for any inaccuracies made in a listing prospectus.
The tightening of the requirements follows a series of corporate scandals involving new listings.
They include the collapse of Shenyang-based orchid grower Euro-Asia Agricultural (Holdings), which allegedly inflated its revenue by 20 times in the four years leading up to its listing in Hong Kong in July 2001. The company went into liquidation a year later and its shares were delisted in May last year.
Its sponsor, ICEA Capital, earlier this year reached a HK$30 million settlement with the SFC without admitting any wrongdoing.
