New requirements of the Code of Conduct for Persons Licensed by or Registered with the Hong Kong Securities and Futures Commission (SFC) on bookbuilding and placing activities in equity and debt capital market transactions take effect on 5 August 2022.

Please refer to our previous Legal Update for an overview of the requirements and recommended next steps for intermediaries.

This latest note summarises additional guidance issued by the regulators and transitional arrangements for offerings that will straddle the effective date of the new requirements.

Additional Guidance for Intermediaries

On 6 May 2022, the SFC issued a set of FAQs providing additional guidance to intermediaries on a number of application areas. In addition, the Hong Kong Stock Exchange published an information paper and FAQs in April 2022 on the consequential amendments to the Listing Rules for the Main Board and GEM to reflect the upcoming changes in the Code of Conduct.

Transitional Arrangements

For debt offerings and share offerings that are not listed, intermediaries must comply with the new Code of Conduct requirements when engaging in in-scope transactions either announced, or for which they are appointed as a capital market intermediary, on or after 5 August 2022.

As regards share offerings that will be listed on the Main Board or GEM, the new Code of Conduct requirements will apply to all listing applications submitted on or after 5 August 2022, including applications that are re-filed after lapsing or withdrawal.

Transitional arrangements for the 'sponsor coupling' requirement of the Code of Conduct are more nuanced – and depend on the submission date of the listing application (including re-filings), and also the dates of appointment of the independent sponsor and overall coordinator.

For more details on the transitional arrangements, please refer to Q1 of the above mentioned SFC FAQs issued on 6 May 2022.

Conclusion

We are aware of considerable discussion within the industry – including through capital markets industry groups – on potential challenges in applying the new requirements of the Code of Conduct.

In particular, intermediaries may find it difficult to reconcile existing market practice with certain aspects of the Code of Conduct. Changes to intermediaries' existing policies and procedures may therefore be required.

Intermediaries with multi-jurisdictional teams, or who participate in global or regional offerings, may also require more detailed guidelines to assist employees to navigate the new Code of Conduct requirements.