SFC recognises progress in sponsors’ work and urges sustained vigilance

The Securities and Futures Commission (SFC) has noted improvement in sponsors’ work since January this year and urged sponsors and other gatekeepers of initial public offerings (IPOs) to keep up and guard against opaque IPO and post-IPO arrangements that may generate suspicious orders and artificially inflate demand for IPO shares or facilitate potentially manipulative post-listing trading activities.

In a circular published today, the SFC has noted signs of improvement in sponsors’ resources and principal capacity since January (Note 1). It has seen constructive steps taken by sponsors to address resource constraints and improve the allocation of sponsor work among their principals. Its observations are as follows:

• Sponsor work has become more broadly distributed across the market. The share of active listing applications in the pipeline involving the five most active sponsors decreased from 77% as of January to 65% as of September.

• The SFC has supported sponsors’ efforts by expediting the processing of new principal submissions. The number of approvals granted by the SFC for new principals between 30 January and 30 September 2026 increased by 65% compared with the same period in 2025.

• The numbers of active listing applications, sponsors and signing principals all increased in the first nine months, respectively (Note 2).

• Average workload of signing sponsor principals eased. The number of sponsors with strained principals and the number of strained principals both decreased by 78% between January and September (Note 3).  

That said, the SFC noted deficiencies persisted in some listing application documents. The SFC issued further written communications to 11 sponsors between January and September, citing concerns related to the substance of listing applicants’ businesses and the adequacy of sponsors’ due diligence and responses. During that period, the vetting process of 65 listing applications was suspended. Sponsors should continue to be diligent in their resource and capacity planning and maintain a strong focus on their work quality.

Furthermore, while noting recent progress in sponsor conduct since January, the SFC has identified serious concerns over dubious arrangements in certain IPOs, where listing applicants apparently provided undisclosed subscription funds or guaranteed returns to designated investors or their connected parties. Such arrangements compromise market integrity by distorting genuine investor demand, impairing fair price discovery and exposing public investors to harm from misleading disclosures and potentially manipulative post-listing trading.

The latest circular sets out the SFC’s expectations for sponsors, overall coordinators (OCs) and capital market intermediaries (CMIs) to step up their vigilance against potential red flags. These include substantial prepayments, loans, investments or other fund flows by a listing applicant shortly before or after listing that may benefit IPO investors or their connected parties, and arrangements that may conceal the identities of the ultimate investors (Note 4).

The SFC also expects these gatekeepers to conduct further enquiries where concerns arise, escalate concerns promptly and, where appropriate, bring matters to the attention of the SFC and the Stock Exchange of Hong Kong.

“The market progress made since January is welcome—improved sponsor capacity and management oversight would strengthen the foundation for rigorous gatekeeping and quality listings,” said Ms Julia Leung, Chief Executive Officer of the SFC. “At the same time, a robust IPO market must be built on market integrity and investor protection. While most market participants play by the rules, intermediaries must remain alert to the warning signs associated with questionable arrangements, and challenge anything that does not add up. The SFC will not hesitate to act against the few bad actors who seek to undermine a fair, orderly and quality market.”

End

Notes:

1. The SFC issued the circular to licensed corporations carrying out sponsor work on 30 January 2026.
2. These increased from more than 420 active listing applications in the pipeline, involving 53 sponsors and 261 signing principals as of January, to more than 610, 64 and 325 as of September.
3. A “strained principal” means a principal who is simultaneously supervising or participating in six or more active listing engagements.
4. Other potential red flags include the emergence of substantial orders shortly before the close of order book, order sizes incommensurate with investors’ financial profiles, and order books that do not align with the marketing strategy or allocation policy previously agreed.