Hong Kong SFC: Sponsor working quality has improved somewhat, average workload noticeably eased.

On 13 October, the Hong Kong Securities and Futures Commission (SFC) noted in a circular that sponsor working quality has improved somewhat since January this year. Specifically, sponsor work has become more widely distributed across the market. The proportion of active listing applications under vetting handled by the five most active sponsors fell from 77% as at January to 65% as at September. At the same time, the average workload of signing principals has eased. Between January and September, the number of sponsors with overburdened principals, as well as the number of overburdened principals, both fell by 78%. The SFC noted in the circular that since January, there have been signs of improvement in sponsors' resources and principal capabilities. Sponsors have taken constructive measures to alleviate resource constraints and improve the allocation of work among principals. The SFC has expedited the processing of newly submitted principal appointment applications to support sponsors' efforts. Between 30 January 2026 and 30 September 2026, the number of new principals approved by the SFC increased by 65% compared with the same period in 2025. The SFC noted that some listing application documents still had deficiencies. Between January and September, the SFC issued further written letters to 11 sponsors, expressing concerns about the business substance of listing applicants and the adequacy of sponsors' due diligence and responses. During this period, a total of 65 listing applications were suspended from processing. Sponsors should continue to diligently plan their resources and capabilities, and attach great importance to maintaining working quality. The SFC reminded that some IPOs still involved suspicious arrangements (such as undisclosed subscription funds and guaranteed returns), and has urged sponsors and overall coordinators to remain vigilant against warning signs such as significant fund flows before and after listing. It also urged sponsors and other gatekeepers of initial public offerings to continue strengthening their work and to guard against opaque arrangements involving initial public offerings and post-listing activities. In addition, the SFC pointed out that since January, although sponsor conduct has improved, it has also identified certain initial public offerings involving suspicious arrangements and is deeply concerned about this, including listing applicants suspected of having provided undisclosed subscription funds or guaranteed returns to designated investors or persons connected with them. These arrangements harm the integrity and stability of the market by distorting genuine investor demand, undermine the fairness of the price discovery mechanism, and harm public investors through misleading disclosures and potentially manipulative trading activities after listing. The latest circular sets out the SFC's requirements, urging sponsors, overall coordinators and capital market intermediaries to be more vigilant against potential warning signs. Relevant warning signs include listing applicants making significant prepayments, loans, investments or other fund flows shortly before or after listing, which may benefit IPO investors or persons connected with them; and arrangements that may conceal the identity of the ultimate investors. Ms Julia Leung, the SFC's Chief Executive Officer, said: "We are pleased to see the progress the market has made since January; improvements in sponsor capabilities and management oversight will lay a solid foundation for strict gatekeeping and promoting quality listings. At the same time, a robust IPO market must be built on market integrity and investor protection. Although most market participants comply with the rules, intermediaries must remain vigilant against various warning signs related to suspicious arrangements and question anything unreasonable. The SFC will not hesitate to take enforcement action against the few wrongdoers who attempt to undermine market fairness, order and quality."