On 22 August 2014, Hong Kong’s Securities and Futures Commission (SFC) issued the Supplemental Consultation Conclusions on the Regulation of IPO Sponsors – Prospectus Liability (Supplemental Conclusions), which are designed to supplement the 2012 Consultation Conclusions on the Regulation of IPO Sponsors (2012 Conclusions) by addressing market concerns on the way in which existing criminal prospectus liability provisions operate. Please refer to our client alert “SFC tightens regulatory regime for IPO Sponsors” for an overview of the 2012 Conclusions.
For the purpose of prospectus liability, the SFC’s view in its original proposals was that sponsors are already covered by the Companies (Winding Up and Miscellaneous Provisions) Ordinance (CWUMPO) as a category of persons who authorise the issue of prospectuses. Following subsequent consultation with industry participants, the SFC acknowledged continued market concerns that legislative amendments may be required to the CWUMPO, to make it explicit that the prospectus liability provisions apply to sponsors.
Having re-examined the legislative provisions, the SFC has confirmed its original position that no such amendments are necessary, on the basis that sponsors are already among the broader category of persons who have potential criminal and civil liability for untrue statements (including material omissions) under sections 40(1)(d), 40A(1) and 342F(1) of the CWUMPO. The SFC also noted that, as a prerequisite to being authorised for registration under the CWUMPO, sponsors must discharge additional obligations in respect of IPO prospectuses under the Hong Kong Listing Rules, including providing a declaration to The Stock Exchange of Hong Kong Limited that the information in the prospectus is true, accurate and complete in all material respects.
Accordingly, the SFC intends to rely on the existing criminal liability provisions in the CWUMPO when considering whether to take action against sponsors who have issued prospectuses containing a material untrue statement/s.
A copy of the Supplemental Conclusions can be found here.