SFC Issues Stern Warning to IPO Sponsors Amid Surge in Listing Applications

During the period from 1 January 2025 to 31 December 2025, the Securities and Futures Commission (the “SFC”) and The Stock Exchange of Hong Kong Limited (the “SEHK”) received over 460 new listing applications, and there were over 110 successful listings in the same period raising approximately HK$286 billion. 

Additionally, as at 29 January 2026, there were over 420 active listing applications in the pipeline.

On 30 January 2026, the SFC published a circular and the appendix thereto amid a surge in new listing applications in 2025.

Specifically, the SFC and the SEHK have observed declining quality of draft listing documents as well as certain substandard conduct of licensed corporations carrying out sponsor work (the “Sponsors”), which may constitute non-compliance with:-

1. Sponsors' obligations under paragraph 17 of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (the “Code of Conduct”);
2. The Corporate Finance Adviser Code of Conduct;
3. Appendix A to the Guidelines on Competence (the “Sponsor Guidelines”); and
4. The Rules Governing the Listing of Securities on SEHK (collectively, the “Main BoardListing Rules”) and the Rules Governing the Listing of Securities on GEM of SEHK. 

In this regard, the SFC has raised five core concerns.

Five Core Concerns Raised 

1. Poor Quality of Draft Listing Documents

Pursuant to paragraph 17.1(b) of the Code of Conduct, the primary role of a sponsor is to provide assurance to regulators that a listing document provides sufficient particulars and information for investors to form a valid and justifiable opinion on a listing applicant's shares, financial condition and profitability. However, it is becoming more common for listing documents to be poorly drafted and insufficiently reviewed.

The SFC has expressed concern that draft listing documents frequently contain unclear or overly complex descriptions of business models, an excessive reliance on marketing or promotional language, and a selective use of industry data that is intended to inflate the applicant's standing in the market.

2. Unreasonably Lengthy Listing Documents

It has been noted that the draft listing documents are overly lengthy due to the extensive and repetitive information found in various sections, along with the inclusion of standard boilerplate disclosures that do not effectively represent the applicant's business or financial performance. Such a lengthy document not only complicates investors' ability to comprehend and assess the listing applicant but also strains regulatory resources, leading to delays in the listing timetable

In this regard, the SFC suggests that the main body of a listing document should not exceed 300 pages in total (excluding appendices such as the accountants' report, valuation report and competent person's report).

3. Inadequate Responses to Regulatory Comments

Notwithstanding the regulators' proactive engagement and direct guidance provided under the Enhanced Application Timeframe (announced by the SFC in October 2024), Sponsors have repeatedly fallen short in addressing regulatory comments with complete and well-substantiated responses. In certain instances, Sponsors proceeded with waiver applications unsupported by adequate justification — particularly where the listing applicant's financial performance was on a downward trajectory and submitted explanations in connection with material complaints that were internally inconsistent and insufficiently grounded in independent due diligence.

4. Non-Compliance During the Offer Stage

The transition to a T+2 settlement period and the introduction of FINI have imposed heightened operational demands on Sponsors and designated overall coordinators. Despite these well-established requirements, a number of Sponsors demonstrated operational failures at the offer stage, including missing prescribed deadlines for submission of placees details and the marketing and independence statement on FINI, failing to identify connected clients, and failing to publish allotment results announcements within the required timeframe — the last of which constitutes a breach of Rule 12.08 of the Main Board Listing Rules. In certain cases, the personnel responsible for offer stage processes were stationed offshore and were frequently unreachable, compounding delays across multiple workstreams.

5. Inadequate Human Resources

Resource deficiencies at a number of Sponsors have reached a level of serious regulatory concern. Certain Principals (as defined in the Code of Conduct) are simultaneously supervising an excessive number of active listing engagements — in the most acute cases, as many as 19 — well beyond what would allow for meaningful oversight. Compounding this, some Sponsors have appointed as Principals individuals whose roles are limited to client-facing or managerial functions, without demonstrable involvement in substantive sponsor work. At the deal team level, over-reliance on itinerant professionals (i.e., individuals who will repeatedly visit and conduct regulated activities in Hong Kong for not more than 45 days in each calendar year) and staff with less than one year of Hong Kong IPO experience has further undermined the quality and integrity of sponsor work being carried out.

What the SFC Now Expects

1. Immediate Reporting Obligations

Within one week, Sponsors must identify all individuals engaged in IPO sponsor work who have not passed Paper 16 of the Licensing Examination for Securities and Futures Intermediaries (the “LE”) within the required timeframe. Within two weeks, Sponsors must report the names of all appointed Principals and their respective number of active listing engagements. Any Sponsor with a Principal simultaneously supervising six or more active listing engagements will be regarded as a Sponsor with Strained Principal(s), unless exceptional circumstances can be justified to the SFC's satisfaction.

2. Inspections and Internal Reviews

Concerned Sponsors (being the 13 sponsors identified in the SFC and SEHK's joint letter of December 2025) and Sponsors with Strained Principal(s) (being any sponsor that has designated any Principals to simultaneously supervise or participate in six or more active listing engagements) should expect on-site thematic inspections in the near future, covering regulatory compliance, resource adequacy, and Management oversight. All such Sponsors must also complete a comprehensive internal review within three months, with Sponsors with Strained Principal(s) additionally required to submit a rectification and resource plan.

3. Enhanced Examination and Licensing Requirements

All individuals engaged in IPO sponsor work must pass Papers 1 and 16 of the Licensing Examination for Securities and Futures Intermediaries within three years before their first engagement. Those who have exceeded the permitted window without passing are in breach of the Sponsor Guidelines and must be removed from all Transaction Teams immediately. Going forward, new RA6 licence (i.e., Type 6: advising on corporate finance) applications must be accompanied by a declaration signed off by the Managers-In-Charge of the Overall Management Oversight of the sponsors, confirming that resource arrangements, including Principal workloads, meet the SFC's expectations.

4. Enforcement

Where failings are identified, the SFC will not hesitate to impose licence conditions restricting business scope, and will commence investigation and/or disciplinary action against Sponsors, their Principals, and Management where warranted. Sponsors are reminded that Management cannot delegate away its ultimate accountability for regulatory compliance.

How We Can Help

The SFC's circular imposes a broad range of immediate and ongoing obligations on Sponsors. Our team, which advises licensed corporations across the full spectrum of their regulatory obligations, is well placed to assist Sponsors in the following key areas.

1. Regulatory Compliance Review and Rectification Planning

Concerned Sponsors and Sponsors with Strained Principal(s) are required to complete a comprehensive internal review within three months, with Sponsors with Strained Principal(s) additionally required to submit a rectification and resource plan. We are able to assist sponsors in identifying gaps against the SFC's expectations, and preparing the rectification and resource plans required for submission. Where a sponsor anticipates an on-site thematic inspection, covering regulatory compliance, resource adequacy, and management oversight, we can work alongside management to undertake a pre-inspection readiness assessment, helping to ensure that internal policies, workflows, and documentation are in order before the regulator arrives.

2. Drafting, Due Diligence, and Ongoing Sponsor Work Standards

We regularly advise Sponsors on the substance and presentation of listing documents — including the adequacy of due diligence, the clarity and balance of risk factor and business disclosures, and compliance with the page guidance. We can also assist Sponsors in building and documenting robust due diligence frameworks to ensure that responses to regulatory comments are complete, well-substantiated, and grounded in independent due diligence.