Hong Kong to get new IPO rules

Penalizes banks for IPO candidates’ misdeeds.

Expected to be released in the next two weeks, the new rules will make Hong Kong's IPO process more like that of the U.S. It will place more pressure on banks to do more to vouch for the integrity of IPO candidates.

Companies will also have to disclose their financial information far earlier in the listing process. The new rules will give investors more time to analyze a company before deciding whether to buy shares through the IPO.

More significantly, banks could be held criminally liable under the new rules if they bring companies to market that make false statements in their prospectuses. Most of the major companies that listed in Hong Kong in recent years have come from China.

Some bankers are protesting the new rules, that vouching for listing candidates is unfair and may discourage them from working with many of the riskier but high-growth Chinese firms. Others, however, said the new rules will help restore faith in Chinese companies that will continue to be a mainstay of the Hong Kong market.

The Hong Kong's Securities and Futures Commission under Chief Executive Ashley Alder has noted deficiencies in some sponsor work over the past few years.

The new rules come at a time when U.S., investors have lost interest in Chinese companies, saying they lacked transparency or their offerings were overpriced.