-- -i
¡ L¡
I
¡'f
l
ì
Securities and Futures Commission
Bth Floor
Chater House
Connaught Road Central
Hong Kong
I
5 July 2OI2
Dear Sir
Consultation Paper on the regulation of sponsors
We refer to the above consultation paper released by the Commission and on
behalf of ACCA (Association of Chartered Certified Accountants) Hong Kong, we
would like to submit our comments in areas particularly stated as below.
Use of implicit words in the consultation paper
We note that implicit wordings like "sound", "reasonable", "material",
"appropriate" are used repeatedly in the consultation document, which are not
well-defined and will be subject to different judgement and interpretation.
However, whether a sponsor is considered to perform his / her job properly, and
hence whether they comply with the Code of Conduct properly, will depend on
this different judgement and interpretation of the requirements set out in these
implicit terms. We therefore consider it necessary for the Commission to
provide the sponsors with guidance, if not a definition, so that they could have
a basis for their interpretation and judgement.
Question 9
Do you agree that a sponsor, after reasonable due diligence, should have
reasonable grounds to believe and does believe that at the time of issue of a
listing document the information in the non-expert sections is true, accurate
and complete in all material respects and that there are no material omissions?
lf not, why not?
While we agree thai a sponsor should perform reasonable due diligence on the
non-expert sections, we consider it more practically appropriate for them to
confirm that they are not aware of any material omissions instead of confirming
that there are no material omissions.
ROOM 1901 19/F
WORLD WIDE HOUSE
19 DES VOEUX ROAD CENTRAL HONG KONG
ãË
+rËl*+#Ë1e8Æ rËi*t/Ë1e{€1e01Ë
T €ãÉ 852
F
2524 4988
lãÊ 852 2868
4909
info@hk.accaglobal.com
www. hongkong.accaglobal.com
Question
11
.
.
Do you agree
that the sponsor should take these sfeps in connection with an
expert report? Are the steps sei out in paragraph 17.6(g) of the draft
Provisions suff icient and appropriate? lf not, why not?
We note from paragraph 17.6(Ð(v) that, unless the expert has done so, a
sponsor is required to make independent inquiries or assessments or obtain
independently sourced information to verify the accuracy and completeness of
the information in the expert report where factual information on which an
expert relies is solely or primarily derived from management's representations
and confirmations. lt seems that it is practically infeasible for sponsors to
assess the working papers of the experts, and hence it may not be possible for
the sponsors to ascertain how the expert verifies the relevant information to be
included in the expert report. The fact that sponsors could lack the expertise in
reviewing the expert's working papers, should they be able to assess them, also
makes it practically difficult for sponsors to comply with this particular
requirement.
Question 18
Do you agree
that the Application Proof submitted with a listing application
should be made publically available when the application is made? lf not,
why not?
ACCA Hong Kong does not agree to this proposal.
We do not consider that this proposal would add any value to the public, and
implementation of this proposal does not necessarily improve the quality of the
Application Proof. To the contrary, it will create confusion to the market when
there are any subsequent amendments to the Application Proof in response to
comments from the regulators which are not accessible by the public. More
importantly, the upload of the Application Proof will constitute leakage of
commercial / confidential information if the listing becomes unsuccessful. Such
a requirement may discourage overseas companies from listing in Hong Kong.
Question 21
Do you agree
that before accepting any appointment as a sponsor, a firm
should ensure that, taking account of other commitments, it has suff icient
staff with appropriate /eve/s of knowledge, skills and experience to devote to
the assign ment throughout the period of the assignment? lf not, why not?
we refer to our comments stated in the opening of this submission,
ln
determining "appropriate" level of knowledge añc experience, we are unsure
whether it relates to listing knowledge and experience, or whether it relates to
the industry knowledge and experience of relating to the listing applicants.
Further, where the listing applicant is involved in a niche industry, it is
important to well define how a sponsor will be considered as having "sufficient"
staff with "appropriate" level of knowledge and experience to devote to the
assignment.
Question 26
Do you agree
that there should only be one sponsor on each engagement?
ACCA Hong Kong does not consider the current regime an issue and hence it is
not necessaryto have only one sponsoron each IPO engagement. As set out in
paragraph 109 of the consultation paper, under the current regime, where a
listing applicant has more than one sponsor, each of the sponsors has
responsibility for ensuring that the obligations and responsibilities under the
Listing Rules are fully discharged. We agree with the proposal as set out in that
paragraph to further clarify the Code of Conduct ìn such situation.
ln addition, we consider that where there is more than one sponsor in a
transaction, they will be able to complement each other with various skills and
experience required in an engagement.
lndeed, we consider that the question of whether there are any benefits in
appointing more than one sponsor should be addressed by the listing applicant.
We also raise our concern that where only one sponsor is allowed for each
engagement, it will limit the opportunities for relevant personnel to obtain the
relevant experience required to be eligible as Principals. This appears to be
inconsistent with the proposal under Question 25 to enlarge the category of
individuals qualified to act as Principals. This also hinders the small sponsor
firms from entering into the industry.
Question 27
lf more than one sponsor is allowed, doyou agree thatthey shoutd alt be
required to meet the Listing Rules independent requirements? lf not, why not?
We do not agree to this proposal. We do not consider the current regime an
issue.
Question 32
Do you agree
that it should be made clear that sponsors are liable for untrue
staiements (including materialomrssions) in a prospectus? If not, why not?
We do not consider it fair to hold sponsors liable for "untrue statement", which
has too wide a scope. Under the current prospectus regime, sponsors may be
subject to civil and criminal liability under the Companies Ordinance for untrue
statements in prospectuses. ln addition, as the prospectus liability provisions
under the Companies Ordinance are also "relevant provisions" under the
Securities and Futures Ordinance, the Commission may take action against,
among others, sponsors in serious cases. The common law also provides a
mechanism to penalise a sponsor who is involved in intentional fraudulent
cases. We do not consider that there is a need of additional protection to the
public. We also do not consider it fair to put sponsors at par as directors of the
listing applicants.
Should you wish to clarify any of the above issues, please feel free to contact us
at2973 1113.
Yours faithfully
Bernard Wu
Chairman