Resources, systems and controls

A sponsor should maintain sufficient resources and effective systems and controls to ensure that the sponsor is able to meet and does meet all its obligations and

responsibilities under the Code and in particular this paragraph and the Listing Rules. In respect of each listing assignment:

(a) before accepting any appointment as a sponsor of an assignment, taking account of other commitments, the sponsor should ensure that it has sufficient staff with appropriate levels of knowledge, skills and experience to devote to the assignment throughout the period of the assignment;

(b) a sponsor should ensure that it is appointed to act for a listing applicant sufficiently in advance of the expected date of a listing application. Taking account of the nature, scale and complexity of the assignment and any other factors that may affect the standard of work, the sponsor should ensure that it has adequate time to undertake the work necessary to meet its obligations and responsibilities under the Code and the Listing Rules. The appointment should clearly:

(i) specify the listing applicant’s responsibilities to facilitate the sponsor to perform its duties and to meet its obligations under the Code and the Listing Rules. In particular provisions should be set out to the effect that the listing applicant should:

(A) fully assist the sponsor to perform due diligence;

(B) procure all relevant parties engaged by the listing applicant in connection with the listing application (including financial advisers, experts and other third parties) to cooperate fully with the sponsor to facilitate the sponsor’s performance of its duties; (C) acknowledge that the sponsor is required, and should be given

every assistance, to meet its obligations and responsibilities under the Code and the Listing Rules to provide information to the regulators including without limitation, notifying the

regulators of reasons when the sponsor ceases to act under paragraph 17.9(d); and

(D) enable the sponsor to gain access to all relevant records in connection with the listing application.

(ii) specify the terms of the sponsor’s fees, including the basis on which the fees are determined, the payment structure and timing and any other factors that would affect the fees. No provisions should be made for any “no deal; no fee” arrangements (or arrangements to that effect).

All terms of an appointment should be agreed as early as possible and in sufficient time for the sponsor to meet its obligations and responsibilities under the Code and the Listing Rules. It is for a sponsor to determine whether its appointment is made in sufficient time to meet its client’s expected timetable. If insufficient time is made available to complete the work required a sponsor

should not accept appointment as a sponsor. A sponsor should not submit a listing application less than 2 months after all the terms of its appointment as a sponsor are agreed. When a sponsor is appointed, it should advise the Stock Exchange as soon as practicable.

(c) taking account of the nature, scale and complexity of the assignment and any other factors that may affect the standard of work, the sponsor should appoint a Transaction Team which:

(i) comprises staff with appropriate levels of knowledge, skills and experience; and

(ii) includes at least one Principal who acts as the supervisor of the Transaction Team

to carry out the assignment throughout the period of the assignment.

Note 1: A Transaction Team should have sufficient knowledge and experience of Hong Kong regulatory requirements.

Note 2: Members in one Transaction Team may work in other Transaction Teams of the sponsor provided that:

(A) Management and the Principals of the respective Transaction Teams are satisfied that the sponsor can properly discharge its responsibilities in all the sponsor work that it undertakes;

(B) If a Principal is assigned to supervise more than one Transaction Team, Management is satisfied that each team is properly and adequately supervised by at least one Principal who has the necessary capacity, capability and competence to supervise; and

(C) The sponsor complies with General Principle 6 and paragraph 10.1 of the Code in respect of conflicts of interest.

(d) there must be clear and effective reporting lines and channels so that decisions on critical matters are not made by the Transaction Team but by Management or a committee designated by Management for this purpose. Members of such designated committee should be independent of the Transaction Team and should have appropriate seniority and expertise necessary to consider the following matters as a minimum:

(i) acceptance of a mandate to act as a sponsor;

(ii) appointment of the Transaction Team and any significant variation to such appointment; and

(iii) resolution of suspicious circumstances, difficult or sensitive issues, conflicting information and material non-compliance by a listing applicant.

(e) Management is ultimately responsible for the supervision of the sponsor work and for compliance with all relevant legal and regulatory requirements, it may

delegate operational functions to its staff but cannot abrogate its responsibilities. Accordingly, Management must put in place appropriate systems, controls and procedures to govern sponsor work, which include:

(i) formulation of an appropriate due diligence plan, amended or updated as necessary;

(ii) allocation of sufficient persons with appropriate levels of knowledge, skills and experience to each assignment over the period of the assignment;

(iii) implementation of the due diligence plan, with any outstanding steps or steps which deviate from the original plan identified, explained and followed up;

(iv) adequate supervision and management of the staff who carry out the work; and that the staff do not act beyond their proper authority; (v) reviews of the standard and extent of due diligence work, and the

performance of the Principals and the Transaction Team; and

(vi) escalation of critical matters including but not limited to those set out in paragraph 17.11(d) to Management or its designated committee for decision.

(f) Upon completion of a listing transaction, a sponsor should submit to the SFC, within 2 weeks after the first day of dealings, its team structure chart in respect of that listing transaction countersigned by a Principal who supervised the transaction. The chart should show the reporting line of each of the licensed or registered staff within the team together with their respective names,

business titles and responsibilities, including in advising the listing applicant on compliance with the Code and the Listing Rules and the performance of due diligence. The SFC may seek further details from firms and individuals to substantiate their submissions.