Hong Kong watchdog: many IPO applications not good enough

HONG KONG, July 5 Thu Jul 5, 2012 11:02am IST

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HONG KONG, July 5 (Reuters) - Many companies looking to list in Hong Kong are failing to provide meaningful disclosure, the city's market regulator said, underscoring the concerns that have pushed it to call for fines or jail time for bankers found to have misled investors on IPOs.

In a market that has been the world's biggest for listings in two of the past three years, only 14 out of 191 IPO applications in the year through March were deemed sufficiently satisfactory for the Securities and Futures Commission to accept without comment.

Nine were so bad that it deferred comment altogether, it said.

"Many draft listing documents failed to provide meaningful disclosures on the applicants' risks, historical financial performances and future plans for investors to make informed assessment of the applicants' businesses and prospects," the regulator said in a statement.

The commission comments on a range of issues related to an application. These include requests for clarification and not all are necessarily negative, a spokesman for the regulator said.

A series of scandals involving mainland Chinese companies that listed in Hong Kong has prompted the regulator to make investment bankers more accountable.

In addition to the proposal for fines or jail time, it has also called for a tougher code of conduct for sponsors, thorough guidelines on due diligence and a requirement that the first draft of a listing application be made public.

Hong Kong's lawmakers are also looking at a new bill that would make auditors criminally liable if they knowingly or recklessly omit a required statement from an audit report.

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