IPO Sponsor Regulation

On July 6, 2012, ACGA sent a submission to the Hong Kong Securities and Futures Commission (SFC) on its "Consultation Paper on the Regulation of Sponsors". The aim of this consultation is to improve the quality of due diligence carried out by investment-bank "sponsors" for IPOs and enhance the value of prospectuses.

We broadly supported the SFC's proposals in our submission, but believe much more emphasis should be placed on the governance advisory role of sponsors in helping listing applicants implement basic systems of governance well before their IPO. We recommended some tangible criteria that the regulator could use to assess the extent and depth of pre-IPO governance preparation. We also expressed concerns about the structure of fees for sponsoring compared to underwriting and the potentially adverse effects on due diligence caused by the proclivity for multiple sponsors and multiple bookrunners (leading to the fee pie being shared between ever larger numbers of banks).