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Hong Kong Confirms IPO Sponsor Liability

by Mary Swire, Lowtax.net, Hong Kong
29 August, 2014

Hong Kong's Securities and Futures Commission (SFC) has released supplemental consultation conclusions reaffirming that initial public offering (IPO) sponsors are subject to existing statutory civil and criminal liability for defective prospectuses.

In May 2012, the SFC issued a Consultation Paper on the Regulation of IPO Sponsors which contained a number of proposals designed to enhance Hong Kong's sponsor regulatory regime. The consultation period ended in July 2012 and the SFC released its initial consultation conclusions on that paper in December 2012.

After the publication of those initial consultation conclusions, the SFC held further discussions with industry participants and other interested parties regarding possible legislative amendments to clarify sponsors' prospectus liability. Proposals relating to the regulatory IPO sponsor regime have already been implemented.

The SFC also took the opportunity to carefully re-examine in more depth the scope and applicability of the existing statutory provisions to sponsors. It concluded that an IPO's sponsors already authorize the issue of prospectuses, and are covered under existing law – and, more specifically, the Companies (Winding Up and Miscellaneous Provisions) Ordinance (CWUMPO).

In fact, it was noted that the CWUMPO provides for a broad category of persons whose roles or functions are not specified but who nevertheless are capable of falling within a class of persons who have "authorized the issue of the prospectus," and are therefore potentially liable. Accordingly, it has been decided that legislative amendments are unnecessary.


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