The HKSAR Government announced in November last year (2020) that the annual quota of the Quality Migrant Admission Scheme (“QMAS”) has been increased from 1,000 to 2,000 with a view to enlarging Hong Kong’s talent pool and strengthening its role as Asia’s World City. It is expected that more QMAS applicants will benefit from such increase in quota.

QMAS is an admission scheme for global talents (including those from Mainland China) to settle in Hong Kong. Applicants may obtain a visa to settle in Hong Kong through the scoring mechanism and the subsequent selection process under QMAS. Successful applicants are not required to secure a job offer before coming to settle in Hong Kong with the QMAS visa granted. QMAS visa holders may work or establish a business in Hong Kong and after continuous residence in Hong Kong for 7 years, may be eligible to apply for permanent residency in Hong Kong.

If you wish to know more or would like to consult us about visa or immigration matters, please contact us at samsonwong.office@sw-hk.com or +852 2533 2520.

This newsletter is for information purposes only. Its content does not constitute legal advice and should not be treated as such. Stevenson, Wong & Co. will not be liable to you in respect of any special, indirect or consequential loss or damage arising from or in connection with any decision made, action or inaction taken in reliance on the information set out herein.

(中文) 一、SPAC在香港的最新动态

SPAC（即Special Purpose Acquisition Company特殊目的收购公司）虽然多年来只盛行于美国资本市场，但经过近几年上市数量及集资金额的爆发性增长后，全球市场都开始更加关注SPAC。截至今年3月31日，仅3个月的时间，美国SPAC上市数量已达298家，募资额约971.26亿美元，上市数量和募资额已经双双超越2020年全年的数字。据报，香港企业家如长和系创办人李嘉诚及新世界发展行政总裁郑志刚等也计划或正在于美国筹组SPAC上市，个别集资额高达4亿美元。

为了提高香港作为国际金融中心的竞争力，香港特区政府已于上月初正式要求港交所及证监会认真研究在香港引入SPAC的上市制度，且有望在年底前在香港落实SPAC上市制度，并在全球的SPAC资本市场中分一杯羹。然而，美国在过去两年爆发性增长后，很多SPAC亦面临未能在限期前完成并购的问题，因此政策制定者也应提防SPAC泡沫爆破的可能性。

同时，虽然不少欧亚国家已容许SPAC上市，单计亚洲区也有南韩及马来西亚，但暂未见如美国般的热潮。香港在这个时期引入SPAC，应参考其他国家在SPAC监管及管治方面的经验，在对投资者的吸引力及保障之间取得好的平衡。

二、SPAC是什么？

SPAC简单来说，是一家上市时只有筹集的资金，只为并购其他公司而成立，没有任何其他业务的「空壳公司」。从投资者的角度来说，则是集上市、并购、私募投资等金融产品特征及目的于一体的金融工具，深受资金充足和客户资源广泛的基金、投行的青睐。

SPAC一般由发起人（如基金管理机构）发起成立，进行首次公开募股（IPO – Initial Public Offering），由券商从机构投资者和散户投资者中筹集资金，经批准后，该只有资金而没有营运业务的公司在证券交易所上市交易。通常，IPO中筹集的现金100％放置在监管帐户中，直到SPAC完成业务合并时才释放。

SPAC的唯一目的就是寻找欲上市的目标企业并洽谈并购，使目标企业获得融资，并代替SPAC成为上市公司，这个过程称为de-SPAC（即「去SPAC化」）。如果SPAC在24个月内未能完成de-SPAC，则该SPAC将面临清盘，并应将其为投资者托管的资金连本带利归还投资者。

在de-SPAC的过程中，SPAC的发起人（Sponsor）会物色合适的目标企业。若双方达成共识，则会签署合作协议并草拟合并文件，交由监管机构审批。获批后，仍须由SPAC的股东在股东大会上投票，通过的话则继续并购的过程。完成合并当天，目标企业既获得资金，又登陆证券交易所成为上市公司。

根据美国SPAC的实践，其上市及de-SPAC流程如下图所示。

三、SPAC与传统IPO的区别

与传统IPO不同，SPAC是先有上市公司和资金，再并购合适的公司。对目标公司来说，这就有了可在主板市场上市的确定性，避免了传统IPO申请不获批准，导致上市失败或延迟的风险，同时上市的成本也较低。对投资者来说，若并购对象或未如理想或最终未能成功并购，也有赎回股票的退场机制。

但是SPAC的劣势也不容忽视。首先，SPAC收购目标存在较大不确定性，SPAC的投资者无法得知最终将投资什么公司，亦无任何业绩纪录可作参考，更不保证一定能够完成并购，只能相信发起人团队的眼光及能力。其次。虽然SPAC合并交易需经证监会和交易所审核，但这种审核远不如IPO审核严格，同时也不会充分披露信息。如果SPAC管理团队的尽职调查不到位，可能发生造假上市。由此对于公众投资者而言，SPAC模式仍具有一定投资风险。

四、SPAC的监管重点

1、SPAC是否等同于借壳上市？

SPAC与香港监管机构多年来决心打击的借壳上市（买壳）行为看似相似，两者均是私人企业透过与壳公司进行并购取得上市地位，但两者在过程、披露及投资者保障方面有根本上的分别。

借壳上市（又称反收购Reverse Takeover）一般发生在一家规模较小或业务无以为继的上市公司，与一家规模相对较大的私人企业之间，名义上是上市公司收购私人企业以扩展业务，实质为把私人业务及资产上市，又能规避新上市规定的一种方法。壳公司的价值曾经达到数亿港元，导致不少人巧立名目造壳以图利。但这种手法一般枉顾其他投资者的利益，擅自改变上市公司的业务及处置资产，也大大损害市场的诚信、稳健及质素，影响投资者的信心，因此成为港交所的重点打击对象。

为针对并遏止借壳上市的做法，港交所在2019年修订《上市规则》第14章及刊发三封指引信等，以对市场上的借壳上市行为作出定义及纳入规管，赋予港交所较大空间去行使停牌及除牌等监管权力，提高借壳上市的门槛至类似IPO的披露要求，并限制控制权转手后的资产处置等。在现行的监管制度下，在香港借壳上市变得相当困难。

SPAC的分别在于其「成立壳公司」以「并购私人企业」的目的是透明公开的，无论是壳公司的成立、集资、并购私人公司的变相上市都是由发起人主导，并在监管机构的监视下按游戏规则进行，而过程中股东有权离场及对并购进行表决。在这个开诚布公的前题下，就没有了过往借壳上市会影响市场运作，造成虚假市场的弊病。

2、如何确保SPAC的发起人尽其职责？

一般来说，在设立SPAC时，SPAC的发起人可获得创始人股份，约占SPAC总股本的20％，这是其承担在合并交易完成之前，SPAC的设立和维护费用（约500万美元）的对价。除此之外，发起人不能从SPAC集资资金中提取薪酬或收取任何管理费。发起人的股份通常在SPAC合并完成后的一年内禁售。另外，若SPAC在限期内未能成功de-SPAC，其20%股份并不会获退还，因其对价（即设立和维护费用）已对外支付。

在这样的前提下，发起人有很大的诱因去完成de-SPAC，防止其努力付诸流水；同时，发起人也要小心挑选并购的业务，并努力运用发起人的影响力使之成功，才能确保其股份能转化为有价值的投资。在此之上，发起人（包括SPAC的董事会成员和管理层）与被并购对象的董事高管不可以有任何关系或拥有任何利益。

相对而言，传统IPO的保荐人为受证监会监管的机构，为了本身的业务理应尽其保荐人责任，有更大的诱因确保整个IPO过程都合规合法。但由于其报酬并不受上市公司的股价表现影响，所以即使对过往业绩做过充份的调查，但对业务日后的成功与否，则未必是其首要任务。

为加强SPAC发起人努力的诱因及防止发起人匆忙进行de-SPAC，监管机构可以考虑加入发起人出资的要求，以及延长禁售期。同时，若要加强对发起人的监管，也可以考虑在de-SPAC的中介团队中加入类似传统IPO保荐人的持牌人角色，去确保de-SPAC团队工作的合规性及提高对证监会的问责性。

3、关于被并购对象的资料，披露是否充份？

通常在SPAC与并购对象签署合并意向书后，会花大约三至五个月完成被并购方的审计、重组（如需要）、法律尽调、投资银行进行的价格评估，并由律师起草合并文件。在一般SPAC的并购过程中，对目标公司的监管及审查不及传统IPO，中介进行的调查也相对有限。

尽职调查的意义在于减低目标公司在重要事项上欺瞒投资者及监管机构的风险。发起人无论在管理或投资方面有多少经验及知名度，都不能取代实质、到位的尽调工作。

然而，若按《上市规则》第14章有关反收购的门槛去处理，要求de-SPAC达到IPO的标准，则令SPAC失去其让私人企业快速上市的优势。香港的监管机构在制定相关尽调要求时，适宜在中间着墨，在保留市场竞争力之余，提升对投资者的保障。

4、退场机制是否能保障投资者？

美国在经历SPAC的热潮后，有很多SPAC正面对在限期内找不到收购对象的问题。即使给予发起人充足的诱因，也不能解决市场上有可能出现的SPAC资金供过于求的情况。因此，能保障投资者（包括退出的投资者，以及留下的投资者）的退场机制至为重要。

一般SPAC的退场机制有两种。首先，如果SPAC未能在成立后的二十四个月内完成合并交易，则监管账户中的募集资金（包括发起人的出资和投资者的出资）将全额原路退回。其次，在SPAC完成de-SPAC之前，投资者可以于任何时候要求SPAC回购股份，取回自己的投资。这对于投资者可能不满意发起人或并购对象时，可以终止对项目的投资。

唯投资者的中途退场，意味着SPAC用于并购的资金减少，影响并购最后的成功与否。要保障留下来的投资者，可以考虑限制退场的时间在SPAC提出并购目标前，以及在股东投票后（只限投反对票的投资者），以免并购过程因投资者时机不当的退场而失败。

五、总结

正如前文所述，香港正在积极考虑引入SPAC制度。作为较迟加入SPAC市场的一方，香港有着前车可鉴的优势，同时也面对新加坡同一时期加入SPAC的竞争。若特区政府希望SPAC在香港能够取得成功，必须从香港的实际情况出发，在提升香港作为SPAC上市平台的吸引力的同时，加强对投资者，尤其是散户投资者的保障。

本文由本所曾浩贤高级律师、陈正斌律师，及中国执业律师沈佳颖共同合著。如有任何疑问或需要进一步的信息，请联系本所曾浩贤高级律师。

本新闻简讯仅供参考之用。其内容不构成亦不应被视为法律意见。史蒂文生黄律师事务所对于任何因根据或倚赖本文件所载资料所作决定，行动或不行动而引致的损失或损害，史蒂文生黄律师事务所概不负责。

On 31 March 2021, The Stock Exchange of Hong Kong Limited (the “Exchange”) published a consultation paper (the “Consultation Paper”) on a proposed streamlined listing regime for overseas issuers.  According to the Exchange, this is contextual to its Strategic Plan 2019-2021 announced in February 2019, which contained an initiative to continue to develop Hong Kong as a listing and capital raising hub for major global and regional companies on either a primary or secondary basis, thereby attracting global investments seeking exposure to Asia Pacific companies and Mainland investors seeking international exposure.

The Exchange considered the current regime is affected by issues such as complexity of requirements for overseas issuers, inconsistent shareholder protection standards for recognised jurisdictions and acceptable jurisdictions, co-existence of two secondary listing regimes and more restrictive secondary listing requirements for issuers with a centre of gravity in Greater China. In view of these and other issues set out in the Consultation paper, the Exchange set out its proposals, for comment, on amendments to the Listing Rules to streamline the existing regime for overseas issuers (including those with a centre of gravity in Greater China), and also make consequential amendments to the requirements for all issuers (including Hong Kong issuers and PRC issuers).

Summary of proposals

The proposals of the Exchange are at the following dimensions.  Comparison is made with the existing regime for illustrative purpose.  Capitalised terms shall have the same meaning as defined in the Consultation Paper.

Analysis and Takeaways

The Consultation Paper represents an attempt of the Exchange to unify the existing regimes relating to the application for dual primary and secondary listings of overseas issuers.  As the Exchange observed, the market feedback was that the rules are “fragmented, complex and difficult to navigate”, and as a result, the complexity of these requirements may not be conducive to compliance.

The proposed changes are expected to enhance comprehensibility of the rules and the regulatory regime as a whole, resulting in higher regulatory certainty.  It is expected that this may create incentives for overseas issuers which are already primary listed in other exchanges, to explore possibilities of applying for dual primary listing or secondary listing on the Exchange.

It should also be noted that the proposed changes have removed certain more restrictive requirements for issuers with a centre of gravity in Greater China.  This may well encourage and facilitate further “homecoming” secondary listing attempts of these issuers.

Please contact our Partner Mr. Rodney Teoh for any enquiries or further information.

This newsletter is for information purposes only. Its content does not constitute legal advice and should not be treated as such. Stevenson, Wong & Co. will not be liable to you in respect of any special, indirect or consequential loss or damage arising from or in connection with any decision made, action or inaction taken in reliance on the information set out herein.

(中文) 以下情况, 相信大家或有听闻：一名中国内地人士需要在香港以外币进行交易。该人士在香港拥有银行户口，惟账上并没有足够外币，唯有以人民币从第三方“购买”外币，在中国内地将与所需外币等值的人民币支付至该第三方指定的内地银行户口，该第三方安排于香港将外币转到该名内地人士的香港户口。

上述操作为典型的地下钱庄运作模式，旨在规避内地的外汇管制，而收取外币的一方往往不会知悉转到香港户口的资金来源。倘若该笔款项属诈骗骗款，委托进行兑换、收取外币的一方除了有机会需要承担刑事/行政责任外，也有可能被诈骗受害人作出民事追讨要求返还该笔款项。在此情况下，对诈骗毫不知情的收款方是否需要返还款项？根据香港高等法院原讼法庭于DBS Bank (Hong Kong) Limited v. Pan Jing [2020] HKCFI 268的判决，收款方或需向受害人作出返还。

事实背景

被告人潘先生（“潘先生”）为内地商人，需要在香港支付美金进行交易，遂委托其友人购买及兑换美元，将人民币转至该友人的内地银行户口。同日，一家香港公司H2H Trading Co Ltd（“H2H”）将与该笔人民币等值的美金从其香港户口（“H2H户口”）转至潘先生名下的香港户口（“潘先生户口”）。

潘先生不知道的是，一名假冒星展银行（香港）有限公司（“星展银行”）客户的人士（其通过星展银行的身份核实）指示星展银行将该客户银行户口中的美金汇至H2H户口，H2H户口收到该笔汇款后，其中部分美金转到潘先生户口（即潘先生从H2H收到的美金）。

星展银行向香港法院申请了禁制令，潘先生户口内的该笔美金被冻结。

星展银行对潘先生提出民事诉讼及简易判决（summary judgment）申请

星展银行向潘先生提起民事诉讼，（除其他事项）要求潘先生向星展银行返还该笔美金，理由为潘先生须复还其不当得利（restitution of unjust enrichment）。潘先生的抗辩理据为：(1) 其为“付出价值的真诚买家”（bona fide purchaser for value）；及 (2) 其“处境已被改变”（change of position）（即被告人因收取款项而真诚改变其处境，如被要求作出复还是不公平的）。

星展银行指出，潘先生通过地下钱庄取得该笔美金，违反内地法律，故不得依赖该等抗辩理据，并以潘先生对申索并无应通过审讯处理（triable）的抗辩理据为由，向法院申请简易判决。潘先生提出以下几点反对简易判决申请：(1) “真诚买家”抗辩理据；(2) “处境改变”抗辩理据；及 (3) 内地法律下应予以审讯的争议点。

香港法院的决定

香港法院批准星展银行的简易判决申请，潘先生须向星展银行复还该笔150,000美元。

1. 经地下钱庄兑换外币违反内地法律

法庭接纳星展银行的专家意见，认为通过地下钱庄兑换外币的行为已经违反了内地行政法，潘先生可遭行政处罚。尽管相关部门并未作出任何行政处罚或采取任何行动，惟此不代表潘先生未有违反内地法律。

2. 被告人并非付出价值的真诚买家

潘先生指出，其付出了人民币购入美金，而他在兑换外币方面没有经验，完全依赖及相信其友人的安排，并无理由相信该友人会用违法的手段兑换美元。加上潘先生对星展银行所指的诈骗毫不知情，由始至终均是真诚行事，因此应获准提出“真诚买家”抗辩理据。

法庭不接纳潘先生的理据，指出如财产是根据违反内地法律的交易转让的，收取该财产的被告人不能被视作已为该财产付出任何价值。于本案中，潘先生经地下钱庄支付人民币及取得美金，该兑换违反内地法律，故该笔人民币在法律上不构成有效的价值，导致潘先生不能依赖“真诚买家”抗辩理据。法庭进一步指出，尽管潘先生声称自己不熟悉外币兑换，但他毕竟是个经验丰富的商人，因此认为潘先生不知道其友人经地下钱庄进行外汇兑换的说法并不可信。

3. 被告人不能依赖“处境改变”抗辩理据

潘先生指出，为了取得该笔美金，他向友人支付人民币，其“处境已经改变”，故应获准主张“处境改变”的抗辩理据。星展银行援引英国上议院Lipkin Gorman v. Karpnale Ltd [1991] 2 AC 548，指出“有过失的一方”（wrongdoer）不得依赖该抗辩理据。

法庭援引了Barros Mattos Junior v. General Securities & Finance Ltd [2005] 1 WLR 247，指出倘若收款方“改变其处境”的行为违反内地法律，除非有关非法行为极其轻微而可予忽略（so minor as to be ignored on the de minimis principle），否则法庭不会将该行为考虑为“处境改变”的一部分。

由于潘先生支付人民币以兑换外币的行为违反内地法律，加上没有证据证明他不知道其友人会经地下钱庄进行兑换，尽管其对星展银行所指的诈骗并不知情，法庭拒绝接纳潘先生提出的“处境改变”抗辩理据。除此之外，法庭认为违反外汇管制规定有违公共政策（public policy），因此拒绝潘先生提出的抗辩理据是合理的。

需要注意的是，法庭在判决中并无提到于内地以地下钱庄进行兑换是否违反香港法律，但指出如兑换交易违反内地法律，香港法院对该交易不予支持。

总结

于中国内地经地下钱庄进行外汇兑换伴随着巨大法律风险，不仅可能违反相关法律而招致刑责及/或行政处罚，委托进行兑换、收取外币的一方亦无从得知有关资金的来源，更遑论知道资金是否涉及诈骗。从本案可以看到，经地下钱庄取得款项的收款方即使对骗案毫不知情，涉案外汇兑换行为仅违反了内地行政（而非刑事）法律法规，且尚未受到任何处罚，惟在处理骗案受害人提出的民事追讨行动时，香港法院倾向以地下钱庄违反内地法律为由，拒绝收款方依赖“真诚买方”及/或“处境改变”的抗辩理据。

On 26 February 2021, Stevenson, Wong & Co. celebrated the Year of Ox at our office in the Landmark. Due to Covid-19, we were unable to gather for a dinner celebration. Nevertheless, our staff were treated to a virtual festival and performance prepared by our trainee solicitors.

Our CNY celebration started with an opening speech by our senior Partner Mr. Willy Cheng. He expressed gratitude to the staff for their hard work throughout last year and his vision for the firm’s future. He also presented Service Awards to staff who have worked for more than 10 years and 20 years in the firm. The night was filled with laughter along with singing and a lion-dance performed by the trainees and an exciting lucky draw!

Our Partner Mr. Cheng delivered an opening speech and presented a service award to our Office Manager Ms. Vivien Lo.

Our trainees sang and performed a lion dance to celebrate the CNY.

A fun-filled night with roasted pig cutting ceremony and exciting lucky draw.

Background

On 8 February 2021, the Securities and Futures Commission (the “SFC”) published a consultation paper on (i) the Proposed Code of Conduct on Bookbuilding and Placing Activities in Equity Capital Market and Debt Capital Market Transactions and (ii) the “Sponsor Coupling” Proposal (the “Paper”).  This followed their thematic review of licensed intermediaries engaged in equity capital market (“ECM”) or debt capital market (“DCM”) over the state of the market as well as the practices and conduct of intermediaries.

In the Paper, the SFC highlighted a number factors which in their view had hampered the price discovery process for some offerings.  These included inflated or opaque demand, undesirable intermediary conduct such as brokers without a mandate “swarming” order books at the last minute with orders of unknown quality, as well as non-alignment of sponsors’ incentives and liabilities especially in larger IPOs which may lead to concerns on a sponsor laxing its due diligence enquiries in competition for the head of the underwriting syndicate.  With a view to meeting their regulatory objectives, the SFC sets out in the Paper their Proposed Code of Conduct on Bookbuilding and Placing Activities in Equity Capital Market and Debt Capital Market Transactions (the “Bookbuilding Code Proposal”) and the “Sponsor Coupling” Proposal (the “Sponsor Coupling Proposal”) and invited comments from market participants and interested parties.

The Proposed Code of Conduct on Bookbuilding and Placing Activities in ECM and DCM Transactions

Specifically, the SFC observed that the bookbuilding and placing activities of certain market participants are affected by substandard practices and control deficiencies in various areas, such as the lack of clearly defined roles or functions of intermediaries engaging in capital raising, fluid syndicate membership and fee arrangements, inflated demand, lack of transparency, conflicts of interest, preferential treatment or rebates paid to investors, lack of documentation and potential breaches of the requirements of The Stock Exchange of Hong Kong Limited (“SEHK”).

In the Bookbuilding Code Proposal, the SFC, among other things, purported revision of the Code of Conduct for Persons Licensed by or Registered with the SFC (the “Code of Conduct”) by way of a new paragraph 21 on Bookbuilding and Placing Activities in ECM and DCM Transactions (the “Proposed Code”).  This Proposed Code focused on expected standards of conduct and systems and controls in the following areas:

(a) assessment of the issuer and the offering – before engaging in an offering, a capital market intermediary (“CMI”) should take reasonable steps to obtain an accurate understanding of the issuer and establish a formal governance process to review and assess the offering which involves designation of member(s) of senior management to assess, for example, the structure of the offering, any actual or potential conflicts of interest and other associated risks;

(b) appointment of CMIs and overall coordinators (“OCs”) – the appointments of OCs and other CMIs and the determination of their roles, responsibilities and fee arrangements should all take place at an early stage:

(i) before a CMI (other than an OC) starts any bookbuilding or placing activities, it should ensure that (i) it has been formally appointed by the issuer (or another CMI in the case of a non-syndicate CMI) under a written agreement to conduct such activities, and (ii) the written agreement clearly specifies the roles and responsibilities of the CMI as well as a description of the fee arrangements; and

(ii) likewise, before an OC provides any services as stipulated in the Proposed Code to the issuer for a share offering, or before an OC participates in any bookbuilding or placing activities for a debt offering, it should ensure that (i) it has been formally appointed by the issuer under a written agreement to conduct such activities, and (ii) the written agreement clearly specifies the roles and responsibilities of the OC as well as a description of the fee arrangements;

(c) advice to the issuer – an OC should provide advice to the issuer on syndicate membership, fee arrangements, marketing strategy as well as pricing and allocation, and ensure that the advice and recommendations are balanced and based on thorough analysis, taking into account the issuer’s preferences and objectives as well as prevailing market conditions and sentiment, and aligned with all legal and regulatory requirements;

(d) marketing – an OC should advise and assist the issuer in developing an appropriate marketing and investor targeting strategy and should inform other syndicate CMIs of the marketing and investor targeting strategy so that they can carry out their own activities accordingly;

(e) rebates and preferential treatment – a CMI should not offer any rebates to its investor clients or pass on any rebates provided by the issuer.  In addition:

(i) for an IPO, a CMI should not enable any investor clients to pay, for each of the shares allocated, less than the total consideration as disclosed in the listing documents; and

(ii) for a debt offering, a CMI should not enter into any arrangements which may result in investor clients paying different prices for the debt securities allocated;

Furthermore, a CMI should, among other things, disclose to the issuer, the OCs, all of its targeted investors and the non-syndicate CMIs it appoints, any rebates offered by the issuer to CMIs and any preferential treatment of any CMIs or targeted investors (such as guaranteed allocations).  It should also advise the issuer against providing any arrangements whereby, in the case of an IPO, the investor clients would pay, for each of the shares allocated, less than the total consideration as disclosed in the listing documents and, in the case of a debt offering, the investor clients would pay different prices for the debt securities allocated;

(f) assessment of investor clients – a CMI should take reasonable steps to identify connected clients and core connected persons of the issuer and inform the OC before placing an order on behalf of such clients.  An OC should provide more information to CMIs to facilitate their identification of investors related to the issuer, such as a list of such persons or entities;

(g) bookbuilding, including order placement and order book management, pricing – an OC should ensure that the pricing and allocation recommendations made to the issuer fully take into account the principles and factors stipulated under the Proposed Code.  For instance, that the price is determined based on orders received from targeted investors during the bookbuilding process and that the securities are allocated to investors who can build a strong investor or shareholder base for the issuer.  It is also proposed to require the identities of all investors to be disclosed in the order book, except for orders placed on an omnibus basis.

Further, it is proposed that a CMI should:

(i) take reasonable steps to ensure that all orders placed in the order book on behalf of its own investor clients, itself and its group companies represent bona fide demand. The CMI must not place knowingly inflated orders;

(ii) make enquiries with its investor clients about orders which appear unusual, e.g., orders which are not commensurate with the client’s financial profile, before placing these orders; and

(iii) maintain adequate records of orders placed by its investor clients so as to substantiate that there are no fictitious or knowingly inflated orders placed in the order book.

On the other hand, an OC should:

(i) ensure that the identities of all investor clients are disclosed in the order book, except for orders placed on an omnibus basis;

(ii) make enquiries with CMIs if any orders appear to be unusual or irregular;

(iii) consolidate the order book by taking reasonable steps to identify and eliminate duplicated orders, inconsistencies and errors; and

(iv) segregate and clearly identify in the order book any proprietary orders of CMIs and their group companies;

(h) allocation – among other things, an OC or CMI should establish and implement an allocation policy which sets out the criteria for making allocation recommendations to the issuer;

(i) conflicts of interest – among other things, a CMI should establish and implement policies and procedures to identify, manage and disclose actual and potential conflicts of interests with investor clients and to establish and implement policies to govern the process for generating its own proprietary orders as well as making allocations to such orders.  It should give priority to investor clients’ orders over its own proprietary orders and those of its group companies and only be a “price taker” in relation to the proprietary orders; and

(j) disclosures to the issuer, other CMIs and investors – CMIs should, among other things, provide information in a timely manner and ensure that it is complete, accurate and has a proper basis, about connected clients and core connected persons of the issuer for a share offering, and about investor clients which have associations with the issuer, CMIs and their group companies for a debt offering, to the OC and non-syndicate CMIs appointed by them, and to disseminate the marketing and investor targeting strategy to non-syndicate CMIs.  It should also provide “book messages” and other information related to the offering to enable investor clients to make informed decisions.

The “Sponsor Coupling” Proposal

The SFC proposed “sponsor coupling” which requires that, among other things, the listing applicant should appoint at least one sponsor which is independent of the listing applicant who should also be appointed as an OC for the IPO, or have a group company which is also appointed as an OC for the IPO (the “Sponsor OC”).  Interestingly, the Sponsor OC should be appointed as OC and sponsor at the same time and at least two months before filing the listing application.  The listing applicant can appoint other OCs (which may or may not be sponsors of the IPO), which should be no later than two weeks after the submission of the listing application.

As observed by the SFC, the Sponsor Coupling Proposal was aimed to achieve effects such that, among other things, at least one sponsor would be free of potential incentives to limit due diligence in order to secure an OC role, and the Sponsor OC should be in a position to give comprehensive advice to the listing applicant throughout the transaction.

Analysis and Takeaways

The implementation of the Bookbuilding Code Proposal may possibly lead to a change in the executory structure of IPO deals, given that the timeframe has been set for appointment of the OCs and CMIs at an early stage.  Sponsor OC will find itself exercising both functions as sponsor and issuer’s marketing adviser at an early stage of an IPO.  The Proposed Code could also allow a more orderly execution of the bookbuilding and placing process in a given ECM or DCM transaction.

Moreover, the Sponsor Coupling Proposal may bring the interest of the sponsor and OC into better alignment.  The early appointment of Sponsor OC prior to commencement of the sponsor’s due diligence discourages a sponsor from  compromising its due diligence obligations.  From a regulatory perspective, OC which also has a sponsor hat may also be more well-equipped in discharging its regulatory obligations in relation to identification of duplicated orders or circumstances suggesting lack of genuine demands for the securities, in light of its knowledge about the listing applicant and its business acquired in the course of performing its due diligence functions as a sponsor.

Please contact our Partner Mr. Rodney Teoh for any enquiries or further information.

This newsletter is for information purposes only. Its content does not constitute legal advice and should not be treated as such. Stevenson, Wong & Co. will not be liable to you in respect of any special, indirect or consequential loss or damage arising from or in connection with any decision made, action or inaction taken in reliance on the information set out herein.