Following the Hong Kong Securities and Futures Commission’s (SFC) release of a circular on the quality of listing documents submitted by sponsors, a legal professional cautions that issuers should take a holistic approach when selecting sponsors, instead of focusing solely on fees.
Tang Hailong, a partner at DeHeng Law Offices, said issuers should pay closer attention to a sponsor’s overall strengths – including its compliance record, professional capabilities and project experience – with pricing considerations taking a secondary role.
On January 30, the SFC issued a letter highlighting deficiencies in certain listing applications and requiring the sponsors to conduct a comprehensive review within three months. In the circular, the regulator expressed concerns over a range of issues, including incomplete listing documents, inadequate responses to regulatory comments, over-reliance on third parties such as lawyers, accountants and valuers, insufficient competence of responsible officers, and inadequate staffing.
In response, Hong Kong Exchanges and Clearing (HKEX) CEO Bonnie Chan said she welcomed the circular, describing it as a “friendly reminder” on the quality of sponsors’ work. She emphasised that the SFC’s concerns relate to the quality of listing documents submitted by sponsors, and do not reflect dissatisfaction with the qualifications of listing applicants themselves.
A HKEX spokesperson told China Business Law Journal: “The HKEX is committed to a robust, thorough and efficient new listings application process. Sponsors have a critical role in this process, and by appropriately managing their resources, they should ensure the high quality of their work with regards to every listing application, including in the preparation of relevant materials and their responses to regulatory questions.”
In 2025, the HKEX recorded 119 new listings, with the IPO momentum extending into 2026. On February 20, HKEX chairman Carlson Tong revealed at a public event that 488 companies were currently in the listing application pipeline.
Addressing market speculation that the China Securities Regulatory Commission (CSRC) may be tightening policies governing mainland companies seeking Hong Kong listings – and the SFC’s enhanced scrutiny is connected to such developments – Tang said overall regulation of Hong Kong listings by the CSRC has “not materially tightened, but has become more standardised and co-ordinated”.“The enhanced scrutiny in Hong Kong is primarily driven by the internal regulatory needs of its local market,” Tang said. “It is not motivated by simple expansion in the number of Hong Kong listings, nor is it a response to restrictive requirements from the CSRC.”
Tang advised issuers to prioritise sponsors with strong compliance records and positive regulatory evaluations, and to avoid firms with repeated disciplinary actions or poor project quality. Issuers should also assess whether the sponsor’s project team is well-versed in Hong Kong listing rules, possesses effective communication channels with the HKEX, has relevant industry experience, and demonstrates team stability to ensure efficient project execution.
He further suggested that issuers should give preference to firms with proven experience in Hong Kong listings when selecting PRC counsel.
In December 2025, the SFC and HKEX jointly issued letters to 13 sponsors requiring a comprehensive review. These sponsors were involved in 433 IPO applications, accounting for around 70% of the market, and were found to have apparent resource allocation deficiencies.
In an interview with Bloomberg Television, Chan attributed the root cause of the listing document quality issues to the prevailing “excitement” in the market. After several years of subdued activity, the IPO market rebounded sharply during the past year.
“Bankers are so eager to capture the moment and bring as many companies to get listed as possible. In that sense, it is a very positive thing,” Chan said. “But given the big jump, you can understand the stress created in terms of resources and co-ordinating activities.”
Nevertheless, she has stressed that quality is “non-negotiable”.
Under the SFC’s requirements, each principal may not supervise six or more active listing engagements simultaneously. Exceeding that threshold will be regarded as overburdening the principal and failing to allocate adequate resources to discharge regulatory responsibilities.
The 13 sponsors mentioned above, along with other firms whose principals are considered overextended, are required to complete a comprehensive review within three months, and submit remedial and resource allocation plans. The SFC will also conduct on-site inspections of the relevant sponsors in the near term to assess their compliance and resource adequacy.
