SFC pushes for tighter rules on IPO sponsors
Regulator will call on government to change law to make backers criminally liable for approving listing prospectuses with false information
The Securities and Futures Commission will propose making errant sponsors of initial public offerings criminally liable from October next year.
"The changes, along with a streamlined regulatory process, will incentivise sponsors to raise standards, pick the right deals and manage them well, which should in turn reduce risks for investors and all those involved in [initial public offerings]," SFC chief executive Ashley Alder said yesterday in announcing the commission's final proposals on regulating listing sponsors.
The proposals adopt most recommendations the SFC made in a consultation paper released in May. The key reform is criminal liability, with a maximum fine of HK$700,000 for sponsors that knowingly or recklessly approve a prospectus "containing an untrue statement [including an omission] which was materially adverse from an investor's perspective".
The proposals met opposition from investment bankers and lawyers but were welcomed by fund managers and institutional investors.
The SFC confirmed that it would propose the government change the law, which, if approved by legislators, will be enforced from October 1.
Under the law now, staff members of sponsors can be jailed if they are found to have colluded in the drafting of an untrue statement in a prospectus.