【New Stock IPO】The Securities and Exchange Commission is reportedly strengthening review of IPO underwriting bank employees

As the Hong Kong stock IPO market heats up, Bloomberg citing sources reports that the Securities and Futures Commission (SFC) is strengthening its review of bank staff involved in underwriting initial public offerings (IPOs), exacerbating the ongoing talent shortage faced by local brokerages. The report quotes insiders saying that since this year, after the SFC and the stock exchange issued a series of warnings regarding the quality of IPO applications, authorities have significantly increased scrutiny of banks serving as lead underwriters for IPOs.

Due to regulatory suspensions on approving certain applications, some brokerages are struggling to fill vacancies and are working to expand their recruitment efforts to attract experienced professionals for lead underwriting roles. Meanwhile, some individuals returning to the industry or switching to other banks have found their license applications also stalled.

Hong Kong’s IPO volume reached a four-year high last year, and the trading volume at the start of this year was also the busiest in recent years. Regulators are closely monitoring license issuance to address concerns over transaction quality and have criticized the industry for staffing shortages. During the prolonged downturn in trading, banks significantly cut staff and are now working hard to rebuild their teams.

Sources reveal that the SFC has recently adopted a stricter interpretation of relevant rules and regulations, requiring banks to demonstrate they have sufficient junior staff and training capabilities before approving senior banker licenses. The regulator is also scrutinizing those holding expired licenses seeking to re-enter the industry, carefully reviewing their work history and raising more questions about their past employment.

An SFC spokesperson stated that they are concerned about issues of “lack of regulatory knowledge, experience, and resources,” and noted that “some responsible persons are overburdened or lack proper qualifications.” To address this, applications for Category 6 (RA6) licenses and responsible persons must now provide clear evidence of adequate resources, appropriate experience within the trading team, manageable regulatory workload, and concrete documentation of actual IPO experience.