Aggregated News From Investment Management Regulators

SFC consults on conduct requirements for bookbuilding and placing activities

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The Securities and Futures Commission (SFC) today launched a consultation (Note 1) on conduct requirements for capital market transactions in Hong Kong. The proposed requirements would help clarify the roles played by intermediaries in equity and debt capital raisings and set out the standards of conduct expected of them in bookbuilding, pricing, allocation and placing activities.

A separate “sponsor coupling” proposal would require that, for an initial public offering of shares, at least one head of the underwriting syndicate would also act as a sponsor (Note 2).

“Hong Kong is one of the world’s largest capital raising centres. It is therefore vital to promote high standards of behaviour amongst those who arrange offerings,” said Mr Ashley Alder, the SFC’s Chief Executive Officer. “Our proposals for clear conduct guidance for intermediaries participating in securities offerings are consistent with global regulatory standards and will boost overall investor confidence in our markets.”

The proposals were formulated based on recent reports issued by the International Organization of Securities Commissions (IOSCO) (Note 3) to address conflicts of interest and associated conduct risks in equity and debt capital raisings as well as on the SFC’s observations from a thematic review of selected licensed corporations involved in these activities. In formulating the proposals, the SFC conducted extensive soft consultations with industry participants, including both buy-side and sell-side firms.

Market participants and interested parties are invited to submit their comments to the SFC on or before 7 May 2021 via the SFC website (www.sfc.hk), by email ([email protected]), by post or by fax to 2284 4660.

Notes:

  1. The SFC proposes to introduce a new paragraph to the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (Code of Conduct) and a new sub-paragraph to paragraph 17 of the Code of Conduct. Consequential amendments would also be made to the Guideline to sponsors, underwriters and placing agents involved in the listing and placing of GEM stocks published in January 2017. Details are set out in the consultation paper.
  2. This head of syndicate should, either within the same legal entity or the same group of companies, also act as a sponsor. This sponsor has to be independent of the issuer.
  3. IOSCO published a report on Conflicts of interest and associated conduct risks during the equity capital raising process in September 2018 and a report on Conflicts of interest and associated conduct risks during the debt capital raising process in September 2020.

This news item was originally published by the Securities and Futures Commission (SFC HK). For more information, see the Source Link.

Regulator Information

Abbreviation: SFC
Jurisdiction: Hong Kong

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