On 8 February 2021, the Securities and Futures Commission (the SFC) published a consultation paper on (i) a proposed SFC Code of Conduct for Hong Kong Bookbuilding and Placing Activities in Equity Capital Market and Debt Capital Market Transactions (the SFC Proposed Code); and (ii) a proposal to introduce HKEX “sponsor coupling”, which would require at least one overall coordinator to also act as a sponsor.
The proposals followed a thematic review of selected SFC licensed intermediaries engaged in equity capital market or debt capital market Hong Kong bookbuilding and placing activities, which found that, in some offerings, the price discovery process had been hampered by various factors, in addition to the occurrence of “undesirable intermediary conduct”. The SFC’s thematic review also identified a number of good practices, which the SFC proposes to codify to enhance the quality of intermediary conduct and to ensure a level playing field. Separately, the SFC also identified that, particularly in larger IPOs, sponsors’ incentives and liabilities were often misaligned, leading to concerns that sponsors may compromise their due diligence enquiries in order to become the head of the underwriting syndicate.
