| HONG KONG, July 9
HONG KONG, July 9 Hong Kong's securities
watchdog has warned investment bankers they need to provide
"meaningful disclosure" for initial public offerings (IPOs) as
the regulator attempts to improve corporate governance.
The Securities and Futures Commission (SFC) said in its
inaugural newsletter on listing disclosures that bankers could
not just tick the boxes on the same checklist for each IPO.
The SFC's new sponsor regime requires IPO applications to be
substantially complete upon submission and represent a major
cultural shift for IPO bankers who were accustomed to filing
rushed, incomplete submissions that often bore little
resemblance to the final prospectus.
The SFC said IPO submissions had generally improved as a
result of its new rules, but said the quality of disclosure
remains an issue in some cases.
"Each listing applicant is unique and there can never be a
'one-size-fits-all' checklist for the preparation of meaningful
disclosure in the listing document," the SFC said. "An applicant
and its sponsor should critically assess what constitutes
meaningful disclosure in the applicant's context rather than
taking a mechanical box-ticking approach," it added.
Hong Kong introduced tighter IPO rules in October last year,
putting greater responsibility on banks sponsoring the offers in
an effort to improve the quality of IPOs.
A series of auditing scandals have raised questions over the
quality of IPO due diligence and undermined investor confidence.
Chinese textile maker Hontex International Holdings Co had
its shares suspended in 2010, just three months after listing,
when regulators alleged it overstated its financial position in
the listing prospectus.
Authorities revoked the licence of the sponsor of the Hontex
listing, Mega Capital (Asia), and hit it with a record fine.
Hontex had its listing canceled in September 2013.
The new rules come at a critical time for Hong Kong's IPO
market after the Hong Kong stock exchange lost e-commerce giant
Alibaba Group Holding Ltd's IPO to New York, prompting a furious
debate over the future of Hong Kong's status as one of Asia's
major listing destinations.
The SFC also raised concerns over sloppy company profit
warnings, which it said are frequently lacking in clarity and
contain no material information. It urged issuers to make more
meaningful disclosures containing specific figures.
The SFC also signaled its intent to clamp down on delayed
disclosures, warning that the most egregious cases may be
referred to the SFC's enforcement division.
Separately, the Hong Kong Exchanges and Clearing Ltd
introduced a new so-called "name and shame" regime in
April, under which incomplete applications will be rejected and
the banks and issuers submitting such applications will be named
publicly and face an eight-week waiting period to refile their
(Editing by Denny Thomas and Matt Driskill)