The Hong Kong Monetary Authority (HKMA) released today (Friday) its findings of the thematic examinations of sponsor activities.
Between late 2010 and mid 2011, the HKMA conducted a round of thematic on-site examinations (“Sponsor Examinations”) on the Initial Public Offering (“IPO”) sponsor activities of all the five Registered Institutions engaged in such activities to assess their compliance with relevant regulatory requirements. The examinations covered a review of the sponsors’ internal policies and procedures, management supervision of their conduct of sponsor activities, and the due diligence work undertaken by the sponsors in selected IPO transactions.
The report reveals that whilst the Bank Sponsors had in general put in place policies and procedures with reference to regulatory requirements, certain main or common types of deficiencies had been identified during the thematic examinations. Areas suggested for improvement include, among other things, internal controls and management supervisions. Key areas of concern are as follows and case examples are set out in the report.
(a) Policies and procedures
(b) Management supervision
(c) Standard of due diligence work
(d) Disclosure in prospectus
(e) Audit trail and documentation of due diligence
“Sponsors play an important role in the IPO process, and we expect them to discharge their duties and responsibilities properly, demonstrate a clear commitment to comply with regulatory requirements and act in the interest of investors and the integrity of the market,” said an HKMA spokesperson. “Specifically, areas that the examinations focused on are fundamental and key to the satisfactory performance of sponsor activities. Bank Sponsors should take actions to improve their internal controls, management supervision and standard of due diligence work where necessary,” the spokesperson added.
The HKMA has been following up with the sponsors to ensure the implementation of the required actions to address the issues identified in the Sponsor Examinations and avoid recurrence of similar events in the future.
The report is available on the HKMA website.
Hong Kong Monetary Authority
25 November 2011