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SFC issues additional guidance on IPO subscription and financing services

Mar 19, 2025
Latest News SFC SFC issues additional guidance on IPO subscription and financing services

On March 20, 2025, the SFC issued additional guidance for licensed corporations on IPO subscription and financing services to enhance risk management and protect investors from financial risks. This guidance came after reviewing IPO financing activities and identifying imprudent practices by some LCs.

This article was generated using SAMS, an AI technology by Timothy Loh LLP.

On March 20, 2025, the Securities and Futures Commission ("SFC") issued additional guidance in a circular for licensed corporations ("LCs") on IPO subscription and financing services, aiming to enhance risk management practices and protect investors from financial risks.

This guidance was prompted by the SFC's identification of deficiencies in recent reviews of IPO financing activities by selected LCs. Specifically, certain LCs were found to engage in imprudent and aggressive IPO financing practices, such as accepting subscription orders that exceed clients' financial capabilities.

Some LCs primarily focused on the subscription levels or anticipated rates of IPO stocks rather than clients' financial positions. This approach could result in clients' over-leveraging and increase the risk of client defaults for LCs.

The circular outlines the SFC's expected standards and control measures for LCs, including minimum upfront subscription deposits, financial assessments of firms and clients, proper segregation of clients' deposits, and adherence to FINI investor identification requirements.

Dr. Eric Yip, the SFC's Executive Director of Intermediaries, emphasized the importance of effective risk management for both LCs and investors in IPO subscription activities. He highlighted that the circular aims to provide clear guidance on the SFC's expectations, promoting healthy growth in Hong Kong's capital markets.

Note: FINI refers to the Fast Interface for New Issuance platform launched by the Hong Kong Securities Clearing Company for Hong Kong's IPO settlement process in November 2023.

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