Proposed rules for Hong Kong’s IPO market could hold banks responsible if the companies they sponsor lie to investors, The Wall Street Journal reported. Under the regulations proposed by Hong Kong Securities and Futures Commission, banks and individual bankers could be held liable if a sponsored company lies in its prospectus. The current rules punish company directors and promoters, as well as vaguely defined “authorizing persons,” with up to three-year prison sentences for lying in the prospectus. The commission proposed the rules after it found cases of banks pitching public offerings to companies before properly vetting them. The new rules would put additional pressure on banks during an already weak IPO market, and some banks could exit the sponsorship business altogether as a result. The commission will allow two months for public comment before taking further action.
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