Hong Kong vows to stiffen IPO rules

Hong Kong's finance secretary on Wednesday pledged to tighten standards for new share listings amid growing concerns about fraud in the world's biggest market for initial public offerings (IPOs). Secretary for Financial Services and the Treasury K.C. Chan said tougher new securities regulations currently being debated by lawmakers would "strengthen Hong Kong's position as a premier capital formation centre". They would "oblige listed corporations to disclose price sensitive information (PSI) in a timely manner and impose civil sanctions against non-disclosure", he said in a statement. The "statutory PSI regime" will enhance transparency and "impose civil sanctions against non-disclosure", he said, responding to a lawmaker's concerns about falling standards of corporate governance in the Asian financial hub. An official with the watchdog Securities and Futures Commission (SFC) told AFP that criminal liabilities could also be considered as part of a recently announced review of regulations governing listing sponsors. Chan said the SFC had discovered "certain deficiencies in the work of the sponsors and inadequacies in their internal systems and controls". "The SFC is reviewing the existing requirements relating to the work of sponsors, with a view to putting forward improvement proposals for market consultation shortly," he said. Hong Kong retained its crown as the world's biggest initial public offering market for the third year in a row in 2011, thanks to a slew of companies that turned to the city in a bid to tap mainland China's explosive growth. The city raised a total of $260 billion from new listings last year, which include several blockbuster share sales such as Italian luxury fashion house Prada and Swiss commodities giant Glencore. But some analysts are reportedly worried that the market's rapid growth may lead to lower standards. The securities regulator on Sunday revoked the licence of local brokerage Mega Capital (Asia) and fined it a record HK$42 million ($5.4 million) over misconduct surrounding an IPO three years ago. The brokerage, a unit of Taiwan financial conglomerate Mega Financial Holding Co, was punished for inadequate and substandard due diligence work when advising Chinese firm Hontex International Holdings' share sale in 2009. The clothing maker was suspended from trading after just 64 days for allegedly releasing misleading information in its prospectus. The matter remains before Hong Kong's High Court. Chan said the SFC had commenced investigations or court proceedings over suspected misconduct involving several newly listed mainland Chinese companies. "In accordance with normal practice, the SFC does not comment on specific cases under investigation," he said. Hong Kong stock market chief executive Charles Li on Monday said the exchange was "obviously very seriously concerned about the recent companies issues". "It is the top priority of the exchange to make sure the quality of the companies that have been approved for listing are of the quality that our investors deserve," he told reporters.