SFC identifies continued deficiencies in sponsor work

On 26 March 2018, the Securities and Futures Commission (the "SFC") issued a Circular to licensed corporations on expected standards for sponsor work (the "Circular") and a Report on the Thematic Review of Licensed Corporations Engaged in Sponsor Business (the "Report") following a thematic inspection of sponsors, which found a number of compliance failures and deficiencies in standards of conduct, due diligence practices, and internal systems and controls.

These included:

  • Failure of sponsors to follow up on due diligence despite obvious red flags, such as:
    1. large discrepancies between sales data provided by the company and financial information retrieved from local government offices; and 
    2. relying on a statutory declaration and confirmation as sufficient to ensure accuracy of prospectus disclosure when inconsistencies, backdating and other errors obtained cast doubt on validity of certain arrangements. 
  • Merely following standard due diligence checklists without adapting them to the circumstances of specific listing applications, which was particularly ineffective when key aspects of listing applicants' businesses fall outside the scope of standard checklists.

Please click here to read the full article.

Download PDF Back To Listing