The Hong Kong Stock Exchange has recently published an information paper setting out amendments to the Listing Rules which dovetail with the Securities and Futures Commission (SFC)'s new code of conduct provisions for intermediaries carrying out bookbuilding and placing activities in equity and debt capital market transactions. Our bulletin of 9 November 2021 provides an overview of these new provisions, which were finalised following a consultation last year to address a number of conduct issues impacting the market. They include behaviours leading to inflated demand for offerings, a lack of transparency in orders placed, conflicts of interest where syndicate members invest on behalf of clients and on a proprietary basis, and preferential treatment or rebates paid to investors.
The Listing Rule amendments reflect the roles of capital market intermediaries, overall coordinators and sponsor-overall coordinators, consistent with the new Paragraph 21 and the "sponsor coupling" requirements under the SFC's code of conduct. In addition, the Listing Rules set out associated requirements for issuers and their directors engaging in equity offerings to which Paragraph 21 applies. The Listing Rules also set out the reporting, publication and disclosure requirements to tie in with the new regime. No changes are being made to the Listing Rules in respect of debt capital market transactions.
The Listing Rule amendments will come into effect on 5 August 2022, at the same time as the new SFC code of conduct provisions are implemented. It will, therefore, apply to listing applications filed on or after that date. Given the requirement to appoint sponsor-overall coordinators at least two months prior to the filing of listing applications, it is important to comply with the new regime in advance when documenting engagement mandates for listing applications which will be filed after 5 August 2022.
Transitional arrangements will apply to deal with existing transactions where the listing application has been filed but where timetable slippages may result in a re-filing after 5 August 2022.
Further details regarding the Listing Rule amendments are set out in our recent bulletin of 3 May 2022.
In addition, the SFC has issued a circular setting out the consequential amendments to the Code on Real Estate Investment Trusts (REIT Code) relating to the new regime.
The REIT Code amendments are in line with similar consequential amendments made to the Listing Rules above. They provide that Chapter 3A of the Listing Rules and other Listing Rule provisions relating to sponsor-overall coordinator, overall coordinator and other capital market intermediaries will apply to offerings involving bookbuilding activities for interests in a real estate investment trust (REIT) by a new REIT applicant or an SFC-authorised REIT. The amendments will come into effect on 5 August 2022 and will be applicable to authorisation applications for REITs to be submitted or re-filed on or after 5 August 2022.
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