The Securities and Futures Commission ("SFC") and The Stock Exchange of Hong Kong Limited ("SEHK") have issued a circular on January 30, 2026, highlighting concerns about the quality of draft listing documents and the conduct of licensed corporations carrying out sponsor work (Sponsors). They note deficiencies in listing documents, over-reliance on experts, and insufficient capacity of Principals to supervise listing engagements. The SFC plans to inspect Sponsors' resources and may restrict their business or take regulatory actions.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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On January 30, 2026, the Securities and Futures Commission ("SFC") and The Stock Exchange of Hong Kong Limited ("SEHK") issued a circular addressing concerns about the quality of draft listing documents and the conduct of licensed corporations engaged in sponsor work (Sponsors) in 2025. The circular highlighted significant deficiencies in listing documents and responses to regulatory comments, as well as over-reliance on external experts and insufficient capacity of Principals to supervise Transaction Teams.
The SFC expressed particular concern that many Transaction Team members of active Sponsors lack familiarity with relevant regulatory requirements and adequate experience and resources. The circular underscored specific concerns, including inadequate due diligence and poor process management in listing applications, and Sponsors' potential failure to fully understand the readiness of listing applicants or the implications of listing.
The SFC mandates that all Sponsors submit details of their Principals and active listing engagements to their case officers within two weeks. Sponsors are also required to review and rectify any resource issues within three months. Sponsors with strained Principals will undergo on-site thematic inspections to assess their compliance and resources.
The SFC expects Sponsors to maintain a high standard of professionalism, ensuring that listing applicants meet all requirements and maintain effective systems and controls. Management, including Sponsors' Boards of Directors and senior personnel, is ultimately responsible for overseeing sponsor work and ensuring compliance.
The SFC may suspend the vetting process for listing applications if they are unreasonably lengthy or incomplete, potentially delaying the listing timetable. Sponsors should also ensure that all individuals engaged in IPO sponsor work pass the necessary HKSI LE papers; those who do not meet the criteria must be replaced or removed from active listing engagements.
The SFC may restrict Sponsors' business scope or the number of active listing engagements they can undertake if they fail to meet regulatory requirements or engage in serious misconduct. The SFC will also investigate and take disciplinary action against Sponsors and their Principals when warranted.
To support this process, Sponsors are required to maintain detailed records of their sponsor work and management oversight, demonstrating compliance with relevant regulatory requirements. The SFC emphasizes the need for Sponsors to critically examine the readiness of companies for listing and their own resources before taking on new mandates.
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