Monitor | Like shops, IPO sponsors must be held liable for what they sell

If you splashed out on a new 55-inch television, got the thing home, unpacked it and found out that - contrary to what it said on the outside - the box contained only a 47-inch screen, you'd naturally feel you'd been ripped off.

But you wouldn't call the manufacturer's head office in Korea or Japan or wherever to complain. You'd storm back into the shop where you bought it, and either demand your money back or insist that the salesman replace the television with the model he'd promised you.

And you'd be fully within your rights. Under the Trade Descriptions Ordinance the retailer has a legal duty to make sure the goods he sells are what he says they are, and do what they are meant to do. False description is a criminal offence. Shopkeepers found guilty can go to prison for up to five years.

But investors who buy shares in a Hong Kong initial public offering enjoy no such protection. The issue prospectus can turn out to be a complete pack of lies, but the investment banks selling the shares face no criminal liability.

It's the equivalent of our dodgy TV salesman telling the aggrieved customer: "Nothing to do with me, complain to the factory."

So three cheers for the Securities and Futures Commission, which yesterday called for a change in Hong Kong law to make IPO sponsors criminally liable for prospectuses that contain misleading information or leave out key details.