Hong Kong to crack down on poor share issue prospectuses

Tim Wallace
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BANKS will face tougher penalties if they put incorrect information in the prospectuses of firms planning to list, under new proposals from the Hong Kong authorities unveiled yesterday.

Under new rules “sponsor firms have civil and criminal liability for defective prospectuses,” the Securities and Futures Commission said, concluding its consultation.

But the sponsoring bank will also be given more powers to find out the information it needs: “A listing applicant commits that it and all professional advisers involved in the IPO will fully co-operate with the sponsor.”

That could make banks wary of taking on some firms, and so reduce the options for listing firms, possibly driving them to London.

“The proposals could have unintended consequences like driving some banks away from the sponsor role to a pure underwriting role. That could reduce the overall size and quality of the pool of available sponsor firms,” said Linklaters’ Robert Cleaver. But he expects the impact to be marginal at most, as factors like the valuation and liquidity are more important for listing firms than the regulation of their sponsoring banks.