Electronic Initial Public Offering (eIPO) - Guidelines for Registered Persons Using the Internet to Collect Applications for Securities in an Initial Public Offering
The Securities and Futures Commission (SFC) today released the Guidelines for Registered Persons Using the Internet to Collect Applications for Securities in an Initial Public Offering (Guidelines). The Guidelines are intended to provide guidance to those registered persons who use the Internet to collect applications from their clients or the public for securities in an initial public offering (IPO).
In order to promote and facilitate the use of technology in the IPO process in Hong Kong, during the past few months, the SFC has been working closely with the industry to formulate an eIPO model which is suitable for the Hong Kong market.
With increasing popularity of online trading, the market needs a new application process which is easy and friendly for investors to use and provides various market participants (e.g.
brokers, banks, share registrars etc.) with a more cost-effective means to conduct their business. The new model would encourage competition and innovation among market players and allows investors to have the freedom to choose the eIPO services which meet their needs the best.
It is important to point out that, at this stage, the eIPO method is only a supplement to the existing paper-based approach where white forms and yellow forms are used.
The SFC will continue to work with the industry to facilitate the adoption and implementation of the eIPO in the marketplace.
The proposed multi-channel eIPO model will have the following key features:
- Different market participants (e.g. brokers, banks, Hong Kong Securities Clearing Company Limited etc.) will be allowed to offer the eIPO service to their clients or the public.
They are referred to as the eIPO service providers.
- Each eIPO service provider can set up its own website and use other methods (e.g. by phone, use paper instruction forms etc.) to collect applications from their clients or the public for securities in an IPO.
- Each eIPO service provider will rely on its own business arrangements with clients or the public to effect applicants’ payments for the subscription (e.g.
a bank may rely on its own system to debit applicants’ accounts; brokers will make necessary arrangements with their clients to ensure that there is sufficient fund for the subscription).
- Each eIPO service provider will prepare data files containing all the application information in accordance with the standard data file format specified by the Federation of Share Registrars Limited and submit them either electronically through the SD Net (which is a proprietary network built and maintained by the SFC) to the share registrar or manually through the submission of CD-ROMs to the receiving banks.
- Each eIPO service provider will also submit the consolidated application forms together with the subscription money to the receiving banks which, in turn, transfer the consolidated application forms to the share registrar for further processing.
- Refund of subscription money and delivery of allotted securities will be made to the eIPO service providers or the applicants.
For an eIPO service provider, there are two areas in its operation which are critical to the offering of the securities application collection services to the clients or the public.
The first area concerning the front-end of the operation is about how to properly construct its website and webpages which are used to collect applications in a manner which is consistent with the existing laws and regulations.
The SFC 's Guidelines set out the requirements which should be followed by the eIPO service providers, such as the availability of a full copy of the electronic prospectus (including both the Chinese and English language text) on the website; clear specification of the terms and conditions and application procedures governing the relationships between eIPO service providers and their clients or the public regarding the services etc.
The second area concerning the back-end of the operation is about the operational procedures which must be followed by the eIPO service providers when submitting application information to the share registrar and the receiving banks.
How an Initial Public Offering (IPO) Works
In this respect, the Federation of Share Registrars Limited (Federation) has prepared its own operational procedures titled “Operational Procedures for eIPO Applications Submitted via Banks/Stockbrokers”.
Copies of the SFC 's Guidelines, the Federation 's Operational Procedures and the Procedure to submit Sample Data to the Federation for Testing Data Conformity are posted on the SFC website at http: // www.hksfc.org.hk.
Page last updated : 1 Aug 2012