This newsletter summarises the Appendix (SFC Sponsor Circular Appendix) to the SFC Sponsor Circular to licensed corporations carrying out sponsor work dated 30 January 2026 (SFC Sponsor Circular).¹ This newsletter should be read in conjunction with our earlier newsletter dated 31 January 2026 analysing the main body of the SFC Sponsor Circula.

The SFC Sponsor Circular Appendix sets out specific case examples and details of potential non-compliance with relevant regulatory requirements observed by the Securities and Futures Commission (SFC) and The Stock Exchange of Hong Kong Limited (SEHK). It provides guidance on the SFC’s expectations regarding the conduct of licensed corporations carrying out Hong Kong Sponsor work (HK Sponsors) in Hong Kong and the regulatory provisions that may be engaged where HK Sponsors fall short of these expectations.

The SFC Sponsor Circular Appendix addresses five key areas of concern, corresponding to those identified in the main body of the SFC Sponsor Circular:

1. Serious deficiencies in the preparation of listing documents, responses to regulatory comments and failures at the offer stage;
2. Over-reliance on experts and third parties without adequate assessments of their competency and resources;
3. Insufficient capacity of Principals² to supervise Transaction Teams³ and participate in listing engagements;
4. Attempts to appoint Principals that are not suitably qualified; and
5. Insufficient staff with appropriate levels of knowledge, skills and experience.

PART I: DEFICIENCIES IN LISTING DOCUMENTS AND REGULATORY RESPONSES

The first and most substantial section of the SFC Sponsor Circular Appendix addresses serious deficiencies observed in draft listing documents, responses to regulatory comments, and failures to attend to key regulatory processes and procedures at the offer stage. This section is divided into three sub-sections.

A. Poor Quality of Draft Listing Documents

The SFC Sponsor Circular Appendix emphasises that a HK Sponsor’s primary role 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 SEHK listing applicant’s shares, financial condition and profitability, pursuant to paragraph 17.1(b) of the Code of Conduct.⁴ However, the SFC observes that it is increasingly common for listing documents to be poorly drafted and inadequately reviewed.

The SFC has identified several recurring deficiencies in draft listing documents:

1. unclear or convoluted descriptions of business models;
2. excessive use of marketing or promotional language;
3. selective presentation of industry data aimed at overstating the SEHK listing applicant’s market position; and
4. failure to provide sufficient information and analysis on how relevant SEHK listing applicants are eligible and suitable for listing.

Case Examples: Inadequate Disclosure

Example A: Insufficient Qualitative and Quantitative Information A draft listing document lacked sufficient qualitative and quantitative information to adequately explain, illustrate or substantiate: (a) significant fluctuations in financial performance; (b) historical non-compliance; (c) legal proceedings; (d) sanction related risks; and/or (e) competitive landscape/market share. This hindered investors’ understanding of the SEHK listing applicant’s business and implications on the listing.

Example B: Non-Disclosure of Bribery Incident A draft listing document lacked disclosure on a bribery incident involving the SEHK listing applicant’s director (who was also a controlling shareholder), and failed to provide any analysis or HK Sponsor’s due diligence on how such incident would affect the SEHK listing applicant’s suitability for listing or the director’s competence and integrity.

Example C: Biotech and Specialist Technology Companies In a number of listing applications relating to biotech and specialist technology companies, draft listing documents lacked sufficient disclosure demonstrating how the relevant SEHK listing applicant fulfilled applicable eligibility requirements. Regulators were required to request further information to demonstrate: how the SEHK listing applicant’s Core Products5 had been developed beyond the concept stage; whether the SEHK listing applicant owned the relevant patent and patent rights; and how the SEHK listing applicant could meet the revenue threshold for a commercial company under Chapter 18C of the Rules Governing the Listing of Securities on SEHK (Listing Rules) (Main Board) and the qualifications of the pathfinder SIIs.6

Relevant Regulatory Provisions

The substandard disclosures in the above cases may indicate non-compliance with the following provisions of the Code of Conduct:

• Paragraph 17.1(b): Providing assurance to regulators that a listing document provides sufficient particulars and information for investors to form a valid and justifiable opinion.
• Paragraph 17.2(b): Performing all reasonable due diligence on the SEHK listing applicant before submitting a listing application.
• Paragraphs 17.4(a) and (b): Ensuring that all material information as a result of due diligence has been included in the application proof, which should be substantially complete.
• Paragraph 17.6(d): Responsibilities of the HK Sponsor during the preparation of a listing document, including achieving a thorough understanding of the SEHK listing applicant and gaining a sufficient understanding of the industry in which the SEHK listing applicant operates, with an assessment of its business performance, financial condition, development, prospects, competence of directors, legality and compliance status and existence of any material changes since the latest audited balance sheet, as well as independently verifying all material information.

Unreasonably Lengthy Listing Documents

The SFC has noted that draft listing documents have become unnecessarily long for various reasons, including:

1. extensive repetition of the same information across different sections;
2. inclusion of boilerplate disclosures that do not meaningfully present the SEHK listing applicant’s business or financial performance;
3. “copy-and-paste” of paragraphs from other sections into the “Summary” section, resulting in an overly lengthy summary that loses focus on information critical for investors’ understanding; and
4. use of generic descriptions in the “Business” section that are not specific to the SEHK listing applicant.

The SFC Sponsor Circular Appendix reminds HK Sponsors to adhere to the Listing Rules and follow the Guide for New Listing Applicants⁷ when preparing listing applications. According to Chapter 3.1 of the Guide for New Listing Applicants, SEHK may exercise its discretion to suspend vetting in the following non-exhaustive circumstances:

1. information in the “Summary” section is almost entirely copied-and-pasted from other sections, or does not explain material fluctuations of key financial or business data;
2. the listing document contains extensive marketing and hyperbolic language which may mislead or confuse investors, or includes overly emotional language or disclosure unrelated to the SEHK listing applicant’s principal business; and
3. the listing document does not comply with any of the recommended page limits for the “Summary”, “Industry Overview”, “Regulations” and “History and Development” sections.

International Comparison and 300-Page Guidance

The SFC Sponsor Circular Appendix notes that in the European Union, with effect from 5 June 2026, there will be an overall page limit of 300 pages for the entire listing document (in addition to existing section-specific page limits). Although there is no overall page limit in the People’s Republic of China, the United States, the United Kingdom, Australia and Singapore, the SFC noted that the average number of pages of recent listing documents issued in these jurisdictions is in the range of 250 to 600 pages.

As noted in Charltons newsletter on the SFC Sponsor Circular dated 31 January 2026, the SFC would generally expect the main body of a listing document not to exceed 300 pages in total (excluding the accountants’ report, valuation report and competent person’s report contained in the appendices). An overly voluminous listing document can hinder investors’ ability to clearly understand and properly evaluate a SEHK listing applicant, as well as consume excessive regulatory resources which may cause delays to the listing timetable.

B. Failure to Address Regulatory Comments Despite Clear Guidance

Since the launch of the Enhanced Application Timeframe,⁸ SEHK has engaged directly with key representatives of HK Sponsors to facilitate understanding of material regulatory concerns and outline regulators’ expectations on subsequent responses to comment letters. The SFC has also initiated contact with HK Sponsors on multiple occasions to explain reasons for concern and how they might address such concerns.

However, a recurring concern is the failure of HK Sponsors to provide complete and satisfactory responses to regulatory comments, notwithstanding the clear and proactive guidance provided by the regulators during these engagements. In numerous cases, despite explicit undertakings by HK Sponsors to address issues raised, subsequent submissions still failed to provide satisfactory responses.

Example D: Failure to Justify Waiver Application Despite repeated enquiries and clear guidance, a HK Sponsor failed to provide reasonable and sufficient justification to support a waiver application from strict compliance with Rule 4.04(1) of the Main Board Listing Rules for not including the audited results of the most recent full financial year immediately preceding the issue of the final listing document, particularly given the SEHK listing applicant’s deteriorating financial performance.

Example E: Failure to Update Regulators on Tax Proceedings In a listing application involving material complaints against the SEHK listing applicant, the HK Sponsor’s initial response lacked critical details on tax liabilities and a robust analysis of its impact on the SEHK listing applicant. Subsequently, the HK Sponsor also failed to timely notify or update the regulators of a change in status of certain tax proceedings with relevant tax authorities on underpaid tax and stamp duty.

Example F: Incomplete and Contradictory Submissions In a listing application involving material complaints against the SEHK listing applicant, the HK Sponsor failed to provide satisfactory responses fully substantiated with independent due diligence. Additionally, its submissions were found to contain incomplete, inconsistent, and even contradictory explanations.

Relevant Regulatory Provisions

The above examples raise concerns regarding potential non-compliance with:

• Paragraph 17.2(d) of the Code of Conduct: HK Sponsors should deal with all enquiries raised by, and provide all relevant information and documents requested by, the regulators promptly, including answering any questions addressed to the HK Sponsor in a cooperative and truthful manner.
• Paragraph 17.9(a) of the Code of Conduct: HK Sponsors should reasonably satisfy themselves that all information provided to the regulators during the listing application process is accurate, complete and not misleading in all material respects.
• Paragraph 17.9(b) of the Code of Conduct: HK Sponsors should answer any questions addressed to them in a cooperative and truthful manner.

C. Failure to Attend to Processes and Procedures at the Offer Stage

Following the shortening of the settlement period to T+2 and the introduction of the Fast Interface for New Issuance (FINI) in late 2023, HK Sponsors and designated overall coordinators (OCs) are expected under the Listing Rules and Code of Conduct to allocate experienced and suitably senior staff to attend to key regulatory processes during the offer stage, such as review and clearance of placees and announcements of allotment results.

Example G: Multiple FINI Failures A sponsor-OC had failed to: (i) submit all placees details as well as marketing and independence statement by 10:00 a.m. for clearance by the prescribed 5:00 p.m. deadline on T+1 on FINI, leading to a delay in the remaining processes and procedures; (ii) identify connected clients and only submitted the required consent applications on T+1 upon the regulators’ request; (iii) publish the allotment results announcements on SEHK’s website through the e-Submission System by the prescribed 11:00 p.m. deadline on T+1, which constituted a breach of Rule 12.08 of the Main Board Listing Rules; and (iv) accurately input its role as a designated sponsor-OC on FINI, leading to inability to submit final price, allocation adjustments and control list on FINI.

Example H: Unreachable Offshore Team The designated team responsible for handling the offer stage/FINI related processes and procedures of a sponsor-OC was mainly stationed in the Philippines, and most of the time, the responsible personnel was unreachable resulting in prolonged response time and delay in various workstreams, processes and procedures, including failure to timely submit all placees details by 10:00 a.m. on T+1 for clearance.

Example I: Insufficiently Senior Staff at Offer Stage Sponsor-OCs failed to designate sufficiently senior and experienced persons to attend to the processes and procedures and handle the relevant matters at the offer stage, resulting in unnecessary consumption of regulatory resources in providing support and detailed guidance to their team members throughout the day on T+1.

Relevant Regulatory Provisions

The above examples suggest potential non-compliance with:

• Paragraphs 17.2(g) and 17.13(a)(ii) of the Code of Conduct: Where a listing application involves a public offer, a HK Sponsor should act as the overall manager and put in place sufficient arrangements and resources to ensure that the public offer and all matters ancillary thereto are conducted in a fair, timely and orderly manner.
• Paragraph 17.11(c)(i) of the Code of Conduct: HK Sponsors should appoint a Transaction Team which comprises staff with appropriate levels of knowledge, skills and experience in Hong Kong IPOs to carry out the assignment over the period of the assignment.
• Paragraphs 1.2 and 3.1.1 of the Sponsor Guidelines⁹: Management¹⁰ should ensure sufficient Principals are engaged to supervise Transaction Teams, and Principals should be fully conversant with key issues in each listing assignment.

PART II: OVER-RELIANCE ON EXPERTS AND THIRD PARTIES

The SFC Sponsor Circular Appendix notes that the serious deficiencies in draft listing documents may indicate that HK Sponsors have over-relied on experts and third parties, including legal advisers, accountants, valuers and others, to perform specific tasks such as the drafting of listing documents, without adequate assessments of the experts’ and third parties’ competency and resources.

Relevant Regulatory Provisions

Paragraphs 17.6(g) and 17.7(a) of the Code of Conduct: Where a HK Sponsor engages experts and third parties to perform specific tasks, the HK Sponsor remains responsible for such tasks and should assess whether such experts or third parties are appropriately qualified, experienced and competent for the tasks. The HK Sponsor should also evaluate whether these experts or third parties are adequately resourced, both in terms of suitably qualified personnel and technical capabilities, to fulfil their obligations to the required standard.

Given the serious concerns noted, the SFC requested deal information from selected active HK Sponsors to understand the current situation of the Hong Kong IPO market, including the number of listing engagements and the resources available to undertake such engagements. This inquiry revealed additional serious concerns regarding the adequacy and competency of human resources assigned to listing engagements, as discussed in Parts III to V of the Appendix.

PART III: INSUFFICIENT CAPACITY OF PRINCIPALS

Principals are expected to play a key role in new listing applications, including supervising the Transaction Team, attending to key due diligence processes and providing timely guidance to the Transaction Team when needed. However, the SFC has noted that a concerning number of Principals are simultaneously undertaking six or more active listing engagements.

In the most serious cases observed by the SFC, some Principals were acting as the signing Principal for up to 19 active listing engagements. This is significantly more than what they are reasonably expected to be able to manage, raising serious concerns regarding their capability to provide adequate oversight and to fulfil their supervisory responsibilities.

Example J: Excessive Principal Workloads At one HK Sponsor: All Principals were simultaneously overseeing six or more active listing engagements. The most active Principal was acting as signing Principal for 10 active listing engagements while also serving as a Transaction Team member for nine additional active listing engagements. Other Principals were involved in 11 or more active listing engagements as signing Principals or Transaction Team members. At three other active HK Sponsors: Over 80% of their Principals were simultaneously supervising or participating in six or more active listing engagements. The most active Principals at these HK Sponsors were acting as signing Principal for 19, 17 and 7 active listing engagements, respectively. At another HK Sponsor: The most active Principal was acting as signing Principal in 8 active listing engagements and as a Transaction Team member for six additional active listing engagements as of 31 December 2025.

Relevant Regulatory Provisions

Paragraph 1.2 of the Sponsor Guidelines: Management should ensure that there are sufficient Principals engaged in a full-time capacity to discharge their role in supervising Transaction Teams, taking into account the volume, size, complexity and nature of the sponsor work undertaken by the HK Sponsor. When there are joint HK Sponsors engaged in a particular transaction, each HK Sponsor should have its designated Principal to supervise the transaction.

Note 2(B) to Paragraph 17.11(c) of the Code of Conduct: If a Principal is assigned to supervise more than one Transaction Team, the Management of the HK Sponsor (as defined under paragraph 17.15(i) of the Code of Conduct which includes the Board of Directors, Managing Director, Chief Executive Officer, Responsible Officers, Executive Officers and other senior management personnel) should be satisfied that each team is properly and adequately supervised by at least one Principal who has the necessary capacity, capability and competence to supervise.

Paragraph 3.1.1 of the Sponsor Guidelines: Principals should be involved in, among other things, making key decisions relating to the work carried out by the Transaction Team, determining the breadth and depth of the due diligence review and the amount of resources to be deployed for such work, making a critical assessment of the results of the due diligence and overall assessment of the adequacy of the due diligence review, and ensuring that steps have been taken to properly resolve all issues arising out of such review.

As noted in Charltons’ newsletter on the SFC Sponsor Circular dated 31 January 2026 and as stated in paragraph 26 of the 2018 Thematic Report,¹¹ the SFC raised doubt as to whether a Principal who was simultaneously overseeing six listing applications could adequately supervise the Transaction Team.

PART IV: ATTEMPTS TO APPOINT UNQUALIFIED PRINCIPALS

The SFC Sponsor Circular Appendix highlights attempts by some HK Sponsors to appoint Principals whose experience appears to be limited to client relationship or high-level management roles, rather than substantive involvement in listing engagements.

Example K: Principals with Limited Relevant Experience Some HK Sponsors have attempted to appoint as Principals individuals with only “client relationship”, “client management”, “sector coverage” or high-level management duties and experience. When challenged as to the basis of such appointment and asked to provide supporting documents evidencing the individual’s actual involvement in past listing engagements, some HK Sponsors have been unable to provide any proper written records.

The SFC raised doubts as to whether the Principals in question genuinely satisfy the eligibility requirements to serve as Principals, and whether the respective HK Sponsors have implemented adequate measures to ensure that Principals appointed are suitably qualified.

Relevant Regulatory Provisions

Paragraphs 1.2 and 1.3 of the Sponsor Guidelines: It is the responsibility of the Management to ensure that Principals appointed by the HK Sponsor meet the eligibility criteria as required under paragraph 3.2 of the Sponsor Guidelines. Records of the appointment, assessments made by the Management and the decision-making process of such appointment should be properly kept to demonstrate compliance with the Sponsor Guidelines.

Paragraph 17.10(c) of the Code of Conduct: HK Sponsors are required to keep records, including relevant supporting documents and correspondence, within their control in respect of each listing assignment.

PART V: INSUFFICIENT STAFF WITH APPROPRIATE KNOWLEDGE AND EXPERIENCE

The SFC Sponsor Circular Appendix also notes that a number of HK Sponsors have appointed a considerable number of junior and temporary staff, including itinerant professionals (ITPs) who repeatedly visit and conduct regulated activities in Hong Kong for not more than 45 days in each calendar year, to conduct sponsor work for listing engagements.

During the two years ended 31 December 2025, the SFC noted that more than 40% of the total deal team members at two HK Sponsors had less than one year of experience in Hong Kong IPOs, and ITPs constituted over 50% of the staff responsible for all listing engagements at these HK Sponsors.

Example L: ITPs Without Required Examinations Two HK Sponsors failed to ensure that all their ITPs met the eligibility criteria. These HK Sponsors were unable to establish that all their ITPs had passed the required examination either prior to, or within six months after, the dates of their first engagement in sponsor work. A substantial proportion of their ITPs might not have met such eligibility criteria.

Example M: Transaction Teams Comprised Primarily of ITPs The Transaction Teams for three listing applications expected to be filed within two months were comprised primarily of ITPs. In the most extreme case, eight out of 10 members of a Transaction Team were ITPs and four were reported to have less than one year of experience in Hong Kong IPOs.

Example N: Senior ITPs Without Hong Kong IPO Experience Approximately 50% and 75% of the ITPs engaged by two HK Sponsors during the two years ended 31 December 2025 held positions at the rank of vice president or above. Around 50% and 80% of these senior ITPs had no experience or less than one year of experience in Hong Kong IPOs.

Relevant Regulatory Provisions

Paragraphs 4.1 and 4.4 of the Sponsor Guidelines: All Type 6 regulated activity licensed representatives, including ITPs, intending to engage in IPO sponsor work are required to have passed the Hong Kong Securities and Investment Institute’s Licensing Examination for Securities and Futures Intermediaries (HKSI LE) Paper 16 not more than three years prior to and not later than six months after the date of their first engagement in such work. Individuals who fail to pass the examination before the expiry of the six-month period are prohibited from engaging in any sponsor work until they have passed the examination.

Paragraphs 17.11(a) and 17.11(c)(i) of the Code of Conduct: Taking account of other commitments, the HK Sponsor should ensure that it has sufficient staff with appropriate levels of knowledge, skills and experience to devote to the assignment throughout before accepting any appointment as a HK Sponsor, and ensure that such staff are appointed to the Transaction Team.

Paragraph 2.2(d) of the CFA Code¹²: A corporate finance adviser, including HK Sponsors, should ensure that they have adequate competence, professional expertise, and human and technical resources for the proper performance of their duties.

Paragraph 1.5 of the Sponsor Guidelines: HK Sponsors should maintain an effective reporting line and communication between the Transaction Teams and other members of the Management regarding the sponsor work undertaken.

RESOURCE REQUIREMENTS: PARAGRAPH 47 OF THE APPENDIX

Paragraph 47 of the SFC Sponsor Circular Appendix sets out the SFC’s expectations regarding resource allocation, which is referenced in the main body of the SFC Sponsor Circular in relation to the rectification and resource plan required from HK Sponsors with Strained Principal(s) and the documentation required for Type 6 regulated activity licence applications.¹³

Pursuant to paragraph 47 of the Appendix, HK Sponsors should:

1. maintain an appropriate balance between Principals based in Hong Kong and those based outside Hong Kong;¹⁴
2. maintain a suitable ratio of members with appropriate seniority and knowledge of Hong Kong IPOs assigned to each Transaction Team; and
3. ensure each Principal handles only a reasonable number of listing engagements, taking into account their capacity to effectively supervise and manage the staff responsible for executing the work.

These requirements are designed to ensure that adequate resources are allocated to manage new listing applications and to effectively oversee the necessary procedures and processes as stipulated under the Listing Rules.

CONCLUSION AND PRACTICAL IMPLICATIONS

The SFC Sponsor Circular Appendix to the SFC Sponsor Circular provides invaluable insight into the SFC’s expectations regarding HK Sponsor conduct and serves as a comprehensive guide to the regulatory provisions that may be engaged where HK Sponsors fall short of these expectations.

The 14 case examples set out in the SFC Sponsor Circular Appendix (Examples A to N) illustrate the specific types of conduct that the SFC considers to be substandard. These examples cover the full spectrum of sponsor work, from initial listing document preparation through to the offer stage, and address concerns relating to both work product quality and resource adequacy.

Key takeaways for HK Sponsors:

1. Listing document quality: HK Sponsors must ensure that listing documents are not merely process-driven documents but provide substantive information enabling investors to form a valid and justifiable opinion. Excessive length, marketing language, and boilerplate disclosures are red flags.
2. Regulatory engagement: When regulators provide guidance on concerns, HK Sponsors are expected to provide complete, accurate and consistent responses. Failure to do so may result in vetting suspension and potential regulatory action.
3. Offer stage procedures: Sufficiently senior and experienced staff must be designated to handle FINI processes and other offer stage procedures. Offshore teams must be adequately supervised and responsive.
4. Principal capacity: The six-engagement threshold is now firmly established as the benchmark. Principals supervising more than six active listing engagements will attract scrutiny.
5. Principal eligibility: “Client relationship” or “sector coverage” experience alone is insufficient to be eligible to act as the Principal of a HK Sponsor. Principals must have demonstrable, documented involvement in listing engagements.
6. ITP reliance: Over-reliance on ITPs, particularly those without Hong Kong IPO experience or the required HKSI LE examinations, is a significant concern. All ITPs must comply with examination requirements.

All HK Sponsors should carefully review the SFC Sponsor Circular Appendix and assess their current practices against the examples and regulatory provisions cited therein. Immediate remedial action should be taken where deficiencies are identified.

For further information or assistance in relation to the matters discussed in this newsletter, please contact:

Charltons

enquiries@charltonslaw.com

Dominion Centre, 12th Floor

43-59 Queen’s Road East

Hong Kong

Tel: + (852) 2905 7888

www.charltonslaw.com