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HKSI Paper 5 study materials
HKSI Paper 5 study resources

HKSI Paper 5: Corporate Finance Adviser and Sponsor Regimes

HKSI Paper 5 · Work through your exam, one topic at a time.

All guide sections

Corporate Finance Adviser and Sponsor Regimes

The sponsor regime is one of the most heavily enforced areas of Hong Kong corporate finance. Expect questions on timing, independence, and the difference between a sponsor, a compliance adviser and an ordinary Type 6 adviser.

Sponsor

  • Only a Type 6 licensee can act as sponsor of a listing applicant.
  • The sponsor must be appointed at least two months before the listing application (Form A1) is filed (Rule 3A.02). The clock runs to the filing date, not the listing date.
  • At least one sponsor must be independent: neither the sponsor nor its group may hold more than 5% of the applicant's shares, and fees must not be substantially contingent on the listing succeeding (Rule 3A.07).
  • Duties: overall management of the listing, reasonable due diligence (Practice Note 21 and Code of Conduct paragraph 17), challenging rather than merely accepting expert reports, reviewing the applicant's systems and controls, ensuring the application is substantially complete, and giving the sponsor's declaration.
  • The sponsor must deal with the Exchange and SFC, attend meetings, and notify the Exchange before resigning. A listing cannot proceed without a sponsor.
  • The SFC can discipline sponsors for deficient due diligence, through fines, suspension, revocation and section 213 orders; the Exchange can also sanction under the Listing Rules.

Compliance adviser

  • Every newly listed issuer must appoint a Type 6 compliance adviser before listing, for the period from listing until publication of its first annual report after listing (Rules 3A.19 to 3A.23).
  • The compliance adviser need not be independent. Its role is ongoing Listing Rules advice, reviewing results announcements and acting as a channel with the Exchange.

Other corporate finance advisers

  • Advising on a notifiable or connected transaction, a whitewash waiver, or a scheme document also requires Type 6. Where the Listing Rules require an independent financial adviser, independence is assessed separately from licensing.

Worked example

An applicant wants to file Form A1 on 1 September but has not appointed a sponsor. It appoints one on 15 July. The filing is premature: the two-month period under Rule 3A.02 expires on 15 September, so the earliest filing date is 15 September.

Traps that cost marks

  • Running the two-month period from the listing date.
  • Assuming a compliance adviser must be independent, or that its appointment is optional.
  • Overlooking the 5% shareholding cap when the sponsor group also acts as underwriter or placing agent.
  • Treating the sponsor's declaration as a formality; the SFC enforces it.