© Reuters. Hong Kong Stock Exchange (00388) launched FINI on November 22. The Hong Kong Securities and Futures Commission reminds securities firms to manage risks prudently
Zhitong Finance APP was informed that on November 8, according to the official website of the Hong Kong Securities and Futures Commission, the Hong Kong Securities and Futures Commission reminded licensed corporations that with the launch of Fast Interface for New Issuance (FINI), they must prudently manage the first-time provision of services to customers. Risks of public offering subscription and financing services. The Hong Kong Stock Exchange (00388) will launch FINI on November 22 to streamline and digitize the initial public offering settlement process. The mechanism for prepayment of funds for public offerings will be revised under FINI.
The Securities and Futures Commission of Hong Kong stated that despite the changes to the advance funding mechanism under FINI, licensed corporations are still required to adopt prudent risk management and control measures when providing IPO subscription and financing services to clients. Licensed corporations should put in place effective measures to guard against any inappropriate high-risk activities, such as accepting large subscription orders from clients without charging them sufficient subscription funds, or providing excessive initial public offering financing to clients. Loans. Relevant measures should particularly cover the following areas:
In terms of prudent credit risk management, before accepting a customer’s subscription instruction, ensure that the customer has sufficient financial resources to pay the full amount of the initial public offering subscription. Where appropriate, impose a requirement to prepay subscription funds on unpaid subscription instructions. Develop prudent IPO financing credit policies and set appropriate credit limits for customers based on the company’s financial capabilities, the customer’s financial status, the scale and demand of the IPO, and current market conditions. Any deviation from the credit policy and credit limits should be justified by a written risk assessment and senior management approval of the deviation should be obtained.
In terms of liquidity risk management and protection of customers’ subscription funds, sufficient cash or bank credit lines are prepared for initial public offering fund settlement; if settlement participants are involved in settlement defaults, they may be subsequently punished by the Hong Kong Exchange. Ensure that when the value of the shares allotted to customers exceeds the subscription funds provided to the company, the company’s existing funds or credit lines are sufficient to provide financing loans to these customers. Customers’ subscription funds that are not deposited in designated banks for fund confirmation purposes will be deposited in the company’s independent bank account to fully protect customers’ subscription funds.
In terms of financial risk management, avoid excessive borrowing from banks and granting initial public offering financing loans to customers that exceed the company’s financial capabilities. Properly account for all assets and liabilities arising from the IPO subscription and settlement process in accordance with generally accepted accounting principles; seek professional advice on appropriate accounting treatment when necessary.
Rigorously assess the potential impact of the IPO financing on the company’s liquid capital position calculated in accordance with the relevant provisions of the Securities and Futures (Financial Resources) Rules (the Financial Resources Rules), including: The amount of any amounts received from customers that are included in liquid assets is capped at 90% of the total subscription costs to be borne by that customer; the total balance sheet liabilities incurred during the IPO subscription and settlement process (e.g. Any outstanding bank loans or settlement liabilities) are included in its adjusted liabilities in calculating the company’s variable required liquid capital.
The Securities and Futures Commission of Hong Kong notes that the senior management of licensed corporations have the primary responsibility for ensuring that their companies implement appropriate risk management. They should implement appropriate risk management policies and monitoring procedures for the areas listed in this circular.