On 22 April 2012, the Securities and Futures Commission (“SFC”) announced that it had revoked Mega Capital (Asia) Company Limited’s (“Mega Capital”) licence to advise on corporate finance, and fined it HK$42 million, for failing to discharge its duties as a sponsor in the listing of Hontex International Holdings Company Limited.
This is the first time the SFC has revoked the licence of an IPO sponsor for due diligence failings: the recovation is not limited to sponsor work, but extends to the provision of any corporate finance advice. The fine is also the highest financial penalty the SFC has imposed on a sponsor to date. The case illustrate the SFC’s expectations of sponsors’ due diligence work. The SFC is expected to publish a further consultation on sponsors’ liability shortly, which may propose making certain sponsor failures a criminal offence. For a more detailed analysis of the case, click here.