The correct approach is to recognize that SEHK Listing Decisions serve as valuable guidance on the Exchange’s interpretation of the Listing Rules but are not legally binding precedents. They are based on the specific facts of a particular case. Therefore, a sponsor cannot assume that a past decision automatically applies to their client. The sponsor’s duty is to analyze their client’s unique situation, use the Listing Decision as a reference point to build their argument, and then formally engage with the SEHK for a definitive ruling. The Listing Rules define a ‘financial year’ as the period for which a profit and loss account is prepared, which does not strictly have to be twelve months. Therefore, simply dismissing a shorter period is incorrect. Treating a Listing Decision as a binding rule that removes the need for consultation is a misunderstanding of its purpose. Similarly, disregarding a relevant Listing Decision in favour of only searching for a Guidance Note is also inappropriate, as all forms of SEHK guidance should be considered in context to form a complete picture of the Exchange’s regulatory approach.

Statement I is correct as maintaining a written record of the conflict check is considered good practice to evidence that the sponsor has fulfilled its obligations. Statement II is correct because a fundamental purpose of the internal vetting process is to satisfy Know-Your-Client (KYC) requirements, which explicitly include anti-money laundering and anti-corruption checks. Statement IV is correct as paragraph 17.10 of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission requires sponsors to maintain records for a period of not less than seven years. Statement III is incorrect because information about a potential sponsor mandate is sensitive and should be disseminated only on a ‘need-to-know’ basis to authorised personnel to comply with Chinese wall requirements. Circulating it widely, especially to research analysts, before the mandate is confirmed and appropriate controls are in place would be a breach of these principles. Therefore, statements I, II and IV are correct.

The correct answer is that the profit estimate does not require a statement of the principal assumptions on which it is based. According to the Hong Kong Listing Rules, while a profit estimate (an estimate for a financial period that has ended but for which results are not yet audited) is generally regarded as a profit forecast, there is a key difference in disclosure. A forward-looking profit forecast must be accompanied by a statement of the principal assumptions (e.g., economic conditions, interest rates) because the outcome is uncertain. In contrast, a profit estimate pertains to a period that has already concluded. The factors influencing the results are therefore known historical facts, not future assumptions, so this disclosure is not required. The other statements are incorrect. The sponsor is still required to provide a certificate for the profit estimate, as it is treated as a profit forecast under the rules. The inclusion of any profit forecast or estimate in a listing document is a voluntary decision by the applicant, not a mandatory one. Finally, the requirement to submit a profit and cash flow forecast memorandum to the SEHK is linked to specific circumstances, such as applying for a waiver from the three-year track record rule, and is not a general requirement for including an estimate in the public document.

According to Paragraph 17 of the SFC Code of Conduct and Practice Note 21 of the Listing Rules, a sponsor has ultimate responsibility for the due diligence process, which includes verification. Statement I is correct because while legal advisers often prepare verification notes, the sponsor must coordinate and take overall responsibility for the entire verification exercise, ensuring its completeness. The sponsor cannot delegate this core duty. Statement II is incorrect as it represents poor verification practice. Sponsors should not accept information at face value and must, where possible, view original documents rather than relying on photocopies to ensure authenticity. Statement III is correct because a key regulatory expectation is that all material information in the listing document must be substantially verified by the time the listing application (Form A1) is submitted to the Stock Exchange. Statement IV is incorrect because over-reliance on verbal confirmations from directors or management is explicitly discouraged. Such confirmations are not a substitute for independent verification and documentary evidence. Therefore, statements I and III are correct.

According to Paragraph 17 of the Code of Conduct for Persons Licensed by or Registered with the SFC, a sponsor has specific obligations when relying on third-party experts during due diligence. Statement I is correct because the sponsor must assess the expert’s independence, qualifications, and competence before engagement. Statement II is also correct as the appointment must be evidenced by a formal engagement letter that clearly defines the scope of work. Statement III reflects a core principle of due diligence: the sponsor must exercise professional scepticism and cannot accept an expert’s work at face value. This involves critically reviewing the report, understanding its assumptions, and questioning its conclusions. Statement IV is incorrect because a sponsor cannot delegate its regulatory liability. While an expert is responsible for their own work, the sponsor retains ultimate responsibility for the contents of the listing document and for ensuring that the due diligence conducted is sufficient. Therefore, statements I, II and III are correct.

The correct answer is that the founder is permitted to sell a portion of his shares, but only if his remaining shareholding ensures he continues to be classified as a controlling shareholder. According to the SEHK Listing Rules, a controlling shareholder is subject to a lock-up period following a company’s initial public offering. This period is structured in two phases. For the first six months after the listing date, the controlling shareholder is strictly prohibited from disposing of any shares. For the subsequent six months (i.e., from the seventh to the twelfth month), the shareholder may dispose of their shares, but with a critical condition: the disposal must not result in them ceasing to be a controlling shareholder. Under the Listing Rules, a ‘controlling shareholder’ is generally defined as a person entitled to exercise or control the exercise of 30% or more of the voting power at general meetings. Therefore, in this scenario, which takes place eight months post-listing, the founder can sell shares as long as his post-transaction holding remains at or above the 30% threshold. The assertion that he is completely prohibited from selling any shares for a full 12 months is incorrect, as this misrepresents the two-phased nature of the lock-up. The idea that he can sell any amount of his shares as long as he obtains prior approval from the SEHK is also incorrect; the primary constraint is the maintenance of control status, not a discretionary approval process for standard sales. Finally, the restriction is not on the method of sale (i.e., requiring a secondary offering), but on the quantum of shares sold and its impact on his controlling stake.

Statement I is correct. Commercial due diligence is fundamentally concerned with assessing the viability and sustainability of the listing applicant’s business model. The insights gained from this process are crucial for crafting the ‘equity story’—the compelling narrative presented to potential investors in the listing document and during roadshows.

Statement II is correct. Financial due diligence involves a deep dive into the company’s financial history, position, and projections. This work is essential for drafting and verifying the Management Discussion and Analysis (MD&A) section of the listing document, which provides investors with a narrative explanation of the company’s financial performance.

Statement III is incorrect. According to Paragraph 17 of the Code of Conduct for Corporate Finance Advisers, a sponsor cannot exclusively rely on the work of other experts, including legal advisers. The sponsor must retain control of the due diligence process, actively participate, and probe the work done by legal counsel. The ultimate responsibility for due diligence rests with the sponsor.

Statement IV is correct. A critical component of comprehensive commercial due diligence involves independent verification of the company’s business relationships. Interviewing key third parties, such as major suppliers and significant customers, helps the sponsor to corroborate management’s claims and gain an objective perspective on the company’s market position and operational stability. Therefore, statements I, II and IV are correct.

The correct answer is that the version of the Application Proof posted on the HKEXnews website must be redacted to remove information such as the offer price and subscription details to avoid it being classified as a prospectus under the Companies (Winding Up and Miscellaneous Provisions) Ordinance. According to Practice Note 22 of the Listing Rules, a listing applicant must submit an Application Proof to the SEHK for vetting while simultaneously publishing a redacted version on the HKEXnews website. This publication occurs without any pre-vetting by the SEHK. The primary purpose of the redactions is to ensure the public document does not constitute an offer of securities to the public, which would trigger prospectus liability under CWUMPO. Therefore, all information relating to the offer structure, price, and means to subscribe must be removed. The applicant must also provide a confirmation from its legal adviser to the SEHK that these redaction and disclaimer requirements have been met. One incorrect option suggests that the SEHK pre-vets the document before publication; this is false, as the publication is concurrent with the submission, increasing the sponsor’s responsibility for its quality. Another incorrect option states that only an English version is required for initial publication, which is also false; both English and Chinese versions must be published simultaneously. Finally, the suggestion that the public version is identical to the one submitted to the SEHK is incorrect, as the public version must be specifically redacted for legal compliance.

Statement I is correct. The HKSI explicitly states that the study manual and its subsequent updates are the only source of materials for setting examination questions. Candidates should rely on these official materials. Statement II is also correct. The ‘Learning Outcomes’ section is a guide to key knowledge areas, but the manual clarifies that candidates may be tested on any aspect of the material unless it is specifically excluded. Statement III is correct. The pass mark for both Paper 15 and Paper 16 examinations is 70%. Statement IV is incorrect. The examination consists of 40 multiple-choice questions to be completed within 60 minutes, not 60 questions. Therefore, statements I, II and III are correct.

The explanation is that a sponsor’s due diligence responsibilities are continuous and do not cease upon the publication of the listing document. This ongoing process, often referred to as ‘bring down’ due diligence, is mandated by Practice Note 21 of the Listing Rules. Its purpose is to identify any material changes or events that occur between the publication of the prospectus and the commencement of dealings. In the event of a significant adverse change, such as the destruction of a key asset, the sponsor has an immediate and critical obligation to assess the materiality of the event. If deemed material, the sponsor must advise the listing applicant to promptly and adequately disclose this information to the investing public, typically through the issuance of a supplemental listing document. This ensures that investors’ decisions are based on information that is accurate, complete, and not misleading up to the last practical moment before listing. Proceeding with the listing without such disclosure would be a severe breach of the sponsor’s duties. Simply reporting the matter confidentially to the regulator is insufficient as it fails the duty of public disclosure. Likewise, treating it as a post-listing compliance matter is incorrect because the event directly impacts the offering itself and the basis on which investors are subscribing for shares.

The correct answer is that the issuer, Innovate Robotics Ltd., is now responsible for delivering the prospectus to the Companies Registry for formal registration. The issuance of a certificate of authorisation by the Stock Exchange of Hong Kong (SEHK) under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (CWUMPO) is a critical step that permits the prospectus to be registered. However, the SEHK’s role is to vet the document and authorise it; the procedural task of filing it with the Companies Registry falls upon the issuer. The SEHK’s authorisation does not confirm that the prospectus is fully compliant with all CWUMPO requirements; it is merely a prerequisite for registration. Furthermore, this authorisation does not absolve the sponsor or any other party from potential civil or criminal liability for any material misstatements found within the prospectus. The SFC’s position is that sponsors are liable as persons who authorise the issue of a prospectus, although this has not been tested in court. Finally, the function of reviewing such prospectuses has been transferred from the SFC to the SEHK to avoid regulatory duplication, so the SFC would not conduct a subsequent review.

The correct answer is that the section should be restructured to present the most material risks first, focus exclusively on risks specific to the applicant’s business, and remove the mitigating statements from this section. According to HKEX Guidance Letter GL86-16, the ‘Risk Factors’ section of a prospectus must be tailored and prioritized to be effective. Risks should be specific to the listing applicant’s unique situation, operations, and industry, rather than being generic or boilerplate statements applicable to any company. The guidance explicitly requires that risks be presented in order of materiality, with the most significant risks appearing first. Furthermore, this section should not contain mitigating facts or descriptions of risk management procedures; such information belongs in other sections, like the ‘Business’ section, to avoid diluting the impact and clarity of the risk disclosure itself. The goal is to provide investors with a clear and candid assessment of the potential downsides of the investment. Including more generic, market-wide risks is contrary to the guidance, which seeks to avoid boilerplate language that obscures company-specific issues. Maintaining alphabetical order is incorrect because it fails to meet the requirement of prioritizing risks by their potential impact on the business. Adding a broad, non-specific disclaimer is also considered poor disclosure practice, as it lacks specificity and does not provide meaningful information to investors.

The correct answer is that the sponsor must obtain a written confirmation from the valuer stating no material change is expected to the opinion, and also critically assess whether the valuation’s bases and assumptions are consistent with other information in the listing document. According to the requirements for listing applications, when an expert’s report cannot be finalised at the time the Application Proof is submitted, the expert must provide a written confirmation. This confirmation, addressed to the listing applicant with copies to the sponsor, the SEHK, and the SFC, must state that based on the work completed, no material change is anticipated for the opinion included in the Application Proof. Furthermore, under Paragraph 17 of the SFC’s Code of Conduct, a sponsor has a fundamental duty to conduct reasonable due diligence. This includes critically assessing the expert’s report to ensure its scope is appropriate and that the information, bases, and assumptions within it are consistent with all other information known to the sponsor. The sponsor cannot simply accept the expert’s work without independent scrutiny. Halting the submission of the Application Proof is not the required procedure, as the rules specifically provide the confirmation letter mechanism to address such situations. Simply disclosing that the valuation is a draft is insufficient as it omits the mandatory requirement for the expert’s formal confirmation about the stability of their opinion. Instructing the listing applicant to handle the matter and relying solely on the expert’s judgment constitutes a failure of the sponsor’s due diligence obligations, as the sponsor must be actively involved in reviewing and assessing the expert’s work.

The explanation teaches the concept that a sponsor’s due diligence responsibility extends far beyond simply collecting information from a listing applicant. According to the Corporate Finance Adviser Code of Conduct, sponsors must not take answers provided by the listing applicant at face value. The correct answer is that the sponsor must treat the questionnaire responses as a starting point and proceed with independent verification, which includes probing management on key issues, cross-checking information with multiple sources, and comparing data against market trends. This reflects the core duty to critically assess and substantiate all material information. Simply maintaining a record of the questionnaire responses, while a necessary administrative step, does not fulfill the substantive duty of verification. Organizing a site visit is an important part of the due diligence process, particularly for a business with physical locations, but it represents only one facet of the broader verification obligation which also covers financial, commercial, and strategic information. Adapting the questionnaire for future use is an internal business practice for the sponsor and is irrelevant to the specific due diligence obligations owed in the context of the current IPO.

This question assesses the understanding of the rules and principles governing the allocation of shares in a placing tranche of a Hong Kong IPO, as stipulated by the SEHK Listing Rules and SFC guidelines.

Statement I is incorrect. Allocating shares to a fund managed by a wholly-owned subsidiary of the lead placing agent (Apex Capital) would be considered an allocation to a ‘connected client’. The SFC’s placing guidelines and the Code of Conduct for Persons Licensed by or Registered with the SFC impose strict restrictions on such allocations to prevent conflicts of interest and ensure a fair and open market. Such an allocation is generally prohibited unless specific conditions and disclosures are met, which are not mentioned here.

Statement II is correct. It is a common and acceptable practice for placing agents to develop an allocation policy that prioritises certain types of investors, such as long-term institutional investors, to foster a stable aftermarket. This is permissible as long as the criteria are objective, fair, and applied consistently, and do not involve any prohibited or preferential allocations.

Statement III is correct. The ‘clawback’ mechanism is a standard feature of Hong Kong IPOs mandated by the Main Board Listing Rules (Appendix 6). If the public offer tranche is oversubscribed by a certain multiple, a pre-determined portion of shares must be reallocated (or ‘clawed back’) from the placing tranche to the public offer tranche to satisfy public demand. This is a required procedure, not a discretionary action.

Statement IV is incorrect. Allocating shares preferentially to the spouse of a director of the placing agent is a clear conflict of interest and a breach of the principle of fair allocation. The SFC’s guidelines explicitly prohibit giving preferential treatment to employees, directors, or their close associates in a share offering. This action would compromise the integrity of the offering process. Therefore, statements II and III are correct.

A sponsor retains overall responsibility for the contents of the listing document, including sections detailing activities managed by other parties. Statement I is correct because the sponsor must ensure the ‘selling restrictions’ section accurately reflects all jurisdictions where the offer is marketed, as this is a critical compliance disclosure. Statement II is correct because marketing to Qualified Institutional Buyers in the US under Rule 144A often triggers enhanced disclosure requirements for financial information and the Management Discussion & Analysis (MD&A) section, which the sponsor must oversee. Statement III is correct as the sponsor is responsible for disclosures related to stabilization, both in the listing document and in post-listing announcements filed with the SEHK. Statement IV is incorrect because a sponsor cannot delegate its due diligence responsibilities; it must be satisfied with the accuracy and completeness of all sections of the listing document, including the ‘plan of distribution’ (underwriting) section, even if another firm is managing the syndication. The sponsor’s responsibility is primary, not secondary. Therefore, statements I, II and III are correct.

Statement I is correct. The Corporate Governance Code (Appendix 14 to the Main Board Listing Rules) requires that the annual report disclose the remuneration of members of senior management on an individual and named basis to enhance transparency and accountability.

Statement II is incorrect. The Corporate Governance Code mandates that the audit committee establish a whistleblowing policy and system not only for employees but also for external parties who deal with the issuer, such as customers and suppliers, to raise concerns about possible improprieties in confidence.

Statement III is correct. The Environmental, Social and Governance (ESG) Reporting Guide (Appendix 27 to the Main Board Listing Rules) is built upon four key reporting principles: Materiality, Quantitative, Balance, and Consistency. The statement accurately reflects the requirements for quantitative assessment of Key Performance Indicators (KPIs) and the use of consistent methodologies to facilitate meaningful comparisons over time.

Statement IV is correct. Both the Corporate Governance Code and the ESG Reporting Guide are structured on a ‘comply or explain’ basis. This means that for the code provisions, an issuer must state whether it has complied and provide considered reasons for any deviation from the provisions in its Corporate Governance Report or ESG Report, respectively. Therefore, statements I, III and IV are correct.

According to the Hong Kong Listing Rules (LR), the composition of a listed issuer’s board is subject to specific requirements. Statement I is incorrect because LR 8.12, while normally requiring at least two executive directors to be ordinarily resident in Hong Kong, allows for this requirement to be waived for PRC or overseas issuers. This waiver is conditional upon ensuring the SEHK can effectively communicate with the directors. Statement II is correct as per LR 3.10A, which mandates that at least one-third of the board must consist of Independent Non-Executive Directors (INEDs). Statement III is also correct; LR 3.10 requires that at least one of the INEDs must possess appropriate professional qualifications or accounting or related financial management expertise. Statement IV is incorrect. Under LR 3.13, while holding more than 1% of the issuer’s shares is a factor in assessing independence, it is a shareholding of 5% or more that will normally cause a person to be considered not independent. A 4% holding does not automatically disqualify a candidate but would need to be carefully considered and disclosed as a factor potentially affecting their independence. Therefore, statements II and III are correct.

The correct answer is that formally submitting the listing application and responding to queries from the SEHK’s Listing Division is a task uniquely attributable to the sponsor’s role. Under the SEHK Listing Rules and the SFC’s Code of Conduct, the sponsor is the sole designated channel of communication with the regulators (the SEHK and the SFC) on behalf of the listing applicant. This responsibility includes managing all formal submissions, addressing regulatory inquiries, and ensuring the applicant meets the suitability requirements for listing. While a firm may hold multiple roles, this specific regulatory liaison duty is exclusive to its capacity as a sponsor. The other activities described are associated with different roles. Organising roadshows to build an order book is a core marketing function of a bookrunner. Coordinating the work of accountants and lawyers for prospectus preparation is a primary logistical task for the global coordinator. Making recommendations on the offer price and allocation strategy is a commercial function performed by the bookrunner and lead underwriter based on market demand.

Statement I is correct. The Market Capitalisation/Revenue test requires a market capitalisation of at least HK$4 billion at the time of listing and revenue of at least HK$500 million for the most recent audited financial year. The company’s figures of HK$4.2 billion and HK$510 million, respectively, satisfy these criteria.

Statement II is correct. The Profit Test, as updated, requires profits attributable to shareholders of at least HK$35 million for the most recent financial year, and aggregate profits of at least HK$45 million for the two preceding financial years. The company’s most recent year profit is HK$38 million (which is ≥ HK$35 million), and the aggregate profit for the two preceding years is HK$10 million + HK$40 million = HK$50 million (which is ≥ HK$45 million). Therefore, the company meets the Profit Test.

Statement III is incorrect. The Market Capitalisation/Revenue/Cash Flow test requires a positive cash flow from operating activities of at least HK$100 million in aggregate for the three preceding financial years. The company’s aggregate cash flow of HK$90 million falls short of this requirement.

Statement IV is incorrect. According to the Listing Rules (LR 8.09), the SEHK may accept a shorter trading record period and/or waive the profit or other financial standards requirements in certain cases, such as for mineral companies or in other exceptional circumstances. The statement that the SEHK will not waive these requirements under any circumstances is false. Therefore, statements I and II are correct.

Statement I is incorrect. According to Listing Rule 8.12, a listing applicant is normally expected to have at least two executive directors ordinarily resident in Hong Kong to ensure sufficient management presence. While the SEHK may grant a waiver for PRC or overseas issuers, this is not an automatic satisfaction of the rule. The provision of travel documents and contact details are conditions the SEHK would consider when granting such a waiver, but it does not replace the need for the waiver itself. Statement II is correct. Listing Rule 3.10 requires a minimum of three INEDs, and Listing Rule 3.10A requires that INEDs must represent at least one-third of the board. For a nine-member board, having three INEDs meets both the absolute minimum of three and the proportional requirement of one-third (3/9). Statement III is correct. As per Listing Rule 3.10, at least one INED must have appropriate professional qualifications or accounting or related financial management expertise. The guidance notes clarify that experience as a chief financial officer of a public company is a clear example of such expertise. Statement IV is incorrect. Listing Rule 3.13 outlines factors affecting independence. A director, partner, or principal of a professional adviser which has provided services to the issuer within one year prior to the appointment would not be considered independent. Full disclosure does not cure this lack of independence for the purpose of the rule. Therefore, statements II and III are correct.

This question assesses the understanding of the composition and management of a Sponsor’s Transaction Team as required by the SFC’s Code of Conduct. Statement I is correct because Paragraph 17.4.2(a) of the Code of Conduct for Persons Licensed by or Registered with the SFC requires a Transaction Team to be comprised of at least one Principal. Statement II is also correct; where more than one Principal is appointed, they are jointly and severally responsible for the work of the Transaction Team, ensuring collective accountability. Statement III is incorrect. The Code of Conduct allows a Principal to supervise more than one Transaction Team, provided that each team can be properly supervised and any actual or potential conflicts of interest are managed appropriately. The statement presents an absolute prohibition which is not the case. Statement IV is correct. The sponsor must ensure that the team members possess the necessary knowledge, skills, and experience, taking into account the specific nature, scale, and complexity of the listing assignment, which in this case is a complex biotechnology firm. Therefore, statements I, II and IV are correct.

Under the Hong Kong Listing Rules (specifically Appendix 10 and related practice notes), controlling shareholders of a newly listed issuer are subject to lock-up periods. During the first six months post-listing (the ‘first lock-up period’), they cannot dispose of any shares. During the subsequent six months (the ‘second lock-up period’), they can dispose of shares but must maintain a controlling interest. However, certain corporate actions are carved out as exceptions and are generally permitted. Statement I is correct because the issue of shares pursuant to a share option scheme that was in place before listing and disclosed in the prospectus is a standard exception (LR 10.07(4)). Statement II is correct because a capitalisation issue (or bonus issue) does not alter the proportionate interest of existing shareholders and is a permitted exception (LR 10.07(3)). Statement IV is correct as the issue of shares upon the exercise of conversion rights attached to warrants issued as part of the IPO and disclosed in the listing document is also a specific exception (LR 10.07(2)). Statement III, however, describes a private placement of new shares to an unrelated party for general working capital. This is not a standard exception to the lock-up rules and would typically be prohibited during the first lock-up period as it could be seen as an indirect disposal or dilution of the controlling shareholder’s interest, unless a specific waiver is obtained from the Stock Exchange. Therefore, statements I, II and IV are correct.

The correct answer is that the profit from the sale of the decommissioned factory and the revaluation surplus on its headquarters building should be disregarded. Under the Main Board Listing Rules, the profit test requires the use of ‘profit attributable to shareholders’ derived from the applicant’s ordinary and usual course of business. This is to ensure that the reported profit reflects the sustainable operational performance of the company. Items that are exceptional, non-recurring, or outside the principal activities of the business must be excluded. The one-off sale of a major asset like a factory is considered an extraordinary event, not part of the core robotics business. Similarly, a revaluation surplus is an accounting adjustment that does not represent actual cash profit from operations and is also excluded. In contrast, interest income from corporate bank deposits is generally considered part of a company’s normal treasury activities and is typically included in the calculation. Excluding only the profit from the factory sale is incorrect as it fails to also exclude the non-operational revaluation surplus. Stating that all three items must be disregarded is also incorrect, as it wrongly excludes interest income, which is part of the ordinary course of business.

The correct answer is that a key reform was the requirement to submit a substantially complete draft listing document, known as an Application Proof, at the initial stage of the listing application. This change was a direct response to SFC findings that sponsors were often failing to complete their due diligence before submitting applications, leading to poor quality filings and delays. By mandating a substantially complete Application Proof, regulators compel sponsors to conduct thorough due diligence upfront, ensuring that the initial submission is of a high standard. This enhances market integrity, protects investors by providing more reliable initial information, and streamlines the regulatory review process. Requiring sponsors to hold a new, separate licence distinct from Type 6 is incorrect; sponsors must hold a Type 6 (advising on corporate finance) licence and be specifically permitted to act as a sponsor, but a new licence category was not created as part of these reforms. Mandating that the IPO sponsor must also serve as the compliance adviser for a minimum of five years is also incorrect; while a compliance adviser is required, the term is not mandated at five years, and this rule does not directly address the quality of the initial due diligence at the application stage. Transferring the primary responsibility for vetting listing applications from the SEHK to the SFC is inaccurate; Hong Kong maintains a dual-filing system where the SEHK is the primary body for vetting listing eligibility under the Listing Rules, working alongside the SFC which oversees the process and enforces the SFO.

The correct answer is that the sponsor must maintain a comprehensive due diligence plan, detailed records of all due diligence work performed, and key communications with the listing applicant. According to Paragraph 17 of the Code of Conduct and the Corporate Finance Adviser Code of Conduct, a sponsor’s records for each listing assignment must be sufficient to demonstrate that it has complied with its regulatory obligations. This includes documenting the entire due diligence process, from planning to execution, and retaining evidence of critical discussions and decisions made with the client. These records are essential for the SFC to assess whether the sponsor has discharged its duties properly. Providing only a list of transaction team members and their roles is insufficient. While maintaining a list of sponsor work and team compositions is a requirement, it does not provide any evidence of the actual due diligence conducted for a specific project. Submitting only the finalised listing prospectus and public announcements is also inadequate. These are public, end-product documents and do not reveal the underlying verification work, inquiries, and professional judgments made by the sponsor during the due diligence process. Internal records concerning staff performance reviews and compensation for the transaction team are confidential human resources matters. They are not part of the records required to demonstrate regulatory compliance for a specific listing assignment to the SFC.

The correct answer is a final proof of the application form for acquiring the securities. The Hong Kong Listing Rules delineate specific document submission timelines during an IPO. A final proof of the application form is required to be submitted to the SEHK before the bulk printing of the listing document, as stipulated under LR 9.11(27). The question specifically asks for documents required in the subsequent stage: after the listing hearing but on or before the date of issue of the listing document. The other documents are all mandatory submissions during this post-hearing, pre-issue window. These include the written notification from HKSCC confirming the securities are eligible for CCASS, the original signed sponsor declaration (Appendix 19 form), and the final, dated listing document signed by every director and the company secretary, as per LR 9.11(29)-(32). Understanding this sequencing is crucial for sponsors managing the listing process.

This question assesses the understanding of the dual-filing regime and the respective roles of the Hong Kong Exchanges and Clearing Limited (HKEX) and the Securities and Futures Commission (SFC) in the Hong Kong IPO process.

Statement I is correct. The HKEX, specifically its Listing Division, acts as the frontline regulator for companies seeking to list. It is responsible for the day-to-day administration of the Listing Rules and is the primary body that reviews a listing application to ensure it meets the prescribed requirements for listing.

Statement II is correct. Under the Securities and Futures (Stock Market Listing) Rules, the SFC has the statutory power to object to a listing application. This power can be exercised if, for example, the SFC believes the disclosure in the prospectus is materially false or misleading, or if it considers that granting the listing would not be in the public interest or the interest of the investing public.

Statement III is incorrect. A sponsor’s duties are not owed exclusively to the HKEX. Under the SFC’s Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (specifically Paragraph 17), sponsors have significant duties of due diligence and are expected to act with professionalism and integrity. The SFC holds sponsors accountable for the quality of their work, and its involvement is a routine part of the dual-filing review process, not just when a criminal offence is suspected.

Statement IV is correct. The ‘dual-filing’ regime, effective since 2003, requires that a listing applicant submits its application and related documents to both the HKEX and the SFC simultaneously. This allows both regulators to review the application concurrently. Therefore, statements I, II and IV are correct.

This question assesses the understanding of best practices for drafting the ‘Risk Factors’ section of a prospectus, as guided by HKEX Guidance Letter GL86-16. Statement I is correct because risk factors should be prioritised based on materiality, and where possible, the potential impact should be quantified to provide meaningful disclosure to investors. Statement IV is correct because disclosure should not be limited to risks that are reasonably likely to occur; a risk with a low probability but a high potential material impact must be disclosed. Statement II is incorrect because including mitigating facts directly within the risk factor disclosure can understate the risk and is contrary to regulatory guidance; mitigation measures are better detailed in the ‘Business’ or ‘Risk Management’ sections. Statement III is incorrect because risk factors must be specific to the listing applicant’s business and circumstances, not generic, boilerplate risks applicable to an entire industry. Therefore, statements I and IV are correct.

According to paragraph 17 of the SFC Code of Conduct, a sponsor must maintain comprehensive records for each listing assignment. These records must document the basis for the sponsor’s opinions and conclusions. A critical requirement is to keep a record of all significant matters that arise during the listing process, which includes internal discussions, disagreements, and the actions taken to resolve them, regardless of whether these matters are ultimately disclosed in the final listing document. This demonstrates the sponsor’s professional judgment and the robustness of its internal processes. The correct answer is that detailed notes of the internal discussions and disagreements concerning the initial expert valuation, the actions taken to resolve the matter, and the involvement of senior management in the final decision must be recorded. This is because the sponsor’s internal deliberations on a significant issue like valuation are a key part of the due diligence trail that regulators would expect to see. Simply keeping the final, accepted report is insufficient as it fails to document the process and challenges encountered. Focusing only on correspondence with the Stock Exchange is also incorrect because the sponsor’s record-keeping duty is an independent obligation to document its own internal work and decision-making. Documenting only the initial due diligence plan without capturing the significant events and resolutions that occurred subsequently would not meet the requirement to record the outcome and assessment of the due diligence performed.