The securities watchdog will propose banning pre-deal research reports by analysts connected with an initial public offering to catch up with international practices. The proposal, to be issued in the next few months in a consultation paper, is set to arouse heated debate in the market. Stockbrokers and investment bankers have already aired their opposition. 'Regulation on pre-deal research reports is a complicated issue,' Securities and Futures Commission chief operating officer Peter Au-Yang Cheong-yan said yesterday. 'The SFC would not simply say we are going to ban such practices immediately. We would listen to the market's comments before we make a decision.' Pre-deal research reports are issued by analysts before initial public offerings. They are usually prepared by sponsors who use the reports as marketing materials. In the United States, Britain and Japan, such reports are banned to prevent conflict of interests. 'We're concerned at the leaking of pre-deal research into the newspapers. A ban on written [pre-listing] research by connected analysts is one option that will be included in the consultation paper,' Stephen Birkett, senior director of corporate finance of the SFC, said in the latest issue of the commission's bi-monthly publication SFC Alert. Investment bankers have reservations over the proposals as the listing prospectuses are usually legally precise, which is difficult for investors to understand. 'Many investors rely on the research reports to understand company information when making their investment decisions. It will be very difficult to promote the offers if the reports are banned,' an investment banker said. Hong Kong Institute of Certified Public Accountants president Edward Chow Kwong-fai said the SFC must not go too far by banning all pre-deal research reports. 'The research reports are important information for investors. Banning such practices is not the best solution. The SFC could tighten regulation of these reports to ensure the information is accurate,' he said. Hong Kong Securities Professionals Association chairman Christopher Cheung Wah-fung said listing prospectuses were only issued on the day of the offer, forcing investors to rely on research reports, which were usually issued earlier. Hong Kong Stockbrokers Association chairman Henry Chan said Hong Kong had more retail investors involved in listings than overseas. 'Regulating the accuracy of the pre-deal research reports is better than banning them,' he said.