Under the Securities and Futures Commission's (SFC's) Additional Fit and Proper Guidelines for Corporations and Authorised Financial Institutions applying or continuing to act as Sponsors and Compliance Advisers (Sponsor Guidelines), a transaction team undertaking a sponsor engagement should include at least one principal who acts as the supervisor of the team.
"Principal" means a responsible officer or an executive officer appointed by the firm to be in charge of the supervision of the transaction team.
A sponsor should ensure that there are sufficient principals engaged in a full time capacity to discharge its role in supervising the transactions team(s), taking into account the volume, size, complexity and nature of the sponsor work that is undertaken by a sponsor. A sponsor should have at least two principals at all times, at least one of which who has satisfied the eligibility criteria under "Option 1" below.
It is the responsibility of the sponsor's management to ensure that principals appointed by the firm meet the criteria required in the Sponsor Guidelines. In order to qualify as a principal, an individual must be a responsible officer or executive officer of the sponsor firm and satisfy one of the eligibility criteria below:
"Corporate finance experience" includes experience providing advice on IPOs, notifiable or connected transactions, rights issues or open offers, takeovers and share repurchases, and other significant transactions or equity-fund raising exercises.
A principal may acquire some (but not all) of the corporate finance experience in markets other than Hong Kong provided that these markets have comparable or higher legal and regulatory standards for listing of companies and the public offers of securities, conduct regulation on sponsors or their functional equivalents and enforcement of rules and regulations governing these respective areas. A principal has to demonstrate to the satisfaction of the SFC how the relevant corporate finance experience has been met if the principal's experience is mainly acquired overseas, and the SFC may impose such conditions on the sponsor as it considers appropriate.
The SFC has discretion to grant dispensations from strict compliance with the requirements on eligibility of principals on a case-by-case basis.
For more information on sponsor staffing for a listing assignment and the role of a principal, please click here.