Eligibility Criteria for Principals
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:
- has acquired a minimum of five years of corporate finance experience in respect of companies listed in Hong Kong; and
- in the five years immediately preceding his appointment, has played a substantial role in advising a listing applicant as a sponsor in at least two completed IPOs in Hong Kong
- is highly experienced in the area of due diligence as a result of leading IPO transactions in Australia, the U.K or the U.S.A;
- is highly experienced in the area of corporate finance in respect of companies listed in Australia, the U.K or the U.S.A; and
- has completed a refresher course or special examination on ethics, sponsor work, and the legal and regulatory requirements governing the conduct of IPO transactions in Hong Kong within the six months preceding the appointment by a sponsor as a principal; and
- is accredited to a sponsor that has at least one other individual who is approved as a Principal pursuant to Option 1 above.
- has participated actively and substantially in due diligence work in at least four completed IPO transactions in Hong Kong within the five years preceding the appointment as a principal;
- has acquired a minimum of five years of corporate finance experience in respect of companies listed in Hong Kong preceding the appointment as principal, and
- has passed a special examination on ethics, sponsor work, and the legal and regulatory requirements governing the conduct of IPO transactions in Hong Kong within the six months preceding the appointment by a sponsor as a principal.
“Corporate finance experience” includes experience providing advice on IPOs, notifiable or connected transactions, rights issues or open offers in accordance with the HKEX Listing Rules, 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.