This question assesses the understanding of various criminal liabilities that can arise for a sponsor firm and its staff during an IPO process. Statement I is correct because under Section 9 of the Prevention of Bribery Ordinance (PBO), a sponsor acting as an agent for a listing applicant commits an offence by accepting an advantage (the personal payment) that could induce them to act against the principal’s best interests, which includes ensuring proper disclosure. Statement II is correct as conspiracy to defraud under common law involves two or more persons (the principal and the associate) acting dishonestly to deceive others (potential investors) by using falsified financial data. Statement III is correct based on Section 101E of the Criminal Procedure Ordinance (CPO), which holds directors and other officers liable for an offence committed by the corporation with their consent or connivance. Statement IV is correct under Section 89 of the CPO, which makes an individual criminally liable for aiding, abetting, counselling, or procuring an offence committed by another party, in this case, the sponsor firm or the principal. Therefore, all of the above statements are correct.

According to Paragraph 17.13 of the Code of Conduct for Persons Licensed by or Registered with the SFC, when a sponsor ceases to act for a listing applicant, it has a specific regulatory obligation. The sponsor must inform the Stock Exchange of Hong Kong (the Exchange) in writing of the termination as soon as practicable. This written notification must also detail the reasons for the cessation of the appointment. This requirement ensures that the regulators are promptly made aware of potential issues with a listing application, such as disagreements over disclosure, due diligence obstacles, or concerns about the applicant’s suitability. While the sponsor will likely communicate the termination to other professional parties involved in the IPO, the primary and immediate regulatory duty is the direct, confidential notification to the Exchange. The responsibility for any public announcement typically rests with the listing applicant, not the resigning sponsor. The return of documents is a contractual and logistical matter that does not supersede the critical regulatory reporting requirement.

According to the Hong Kong Listing Rules, an Independent Non-Executive Director (INED) must be a person who is independent in character and judgement and who has no relationships or circumstances which are likely to affect, or could appear to affect, their judgement. The Rules provide specific criteria to assess independence. A key factor is any material business or financial relationship. If a proposed INED is a partner of a professional firm that has received significant fees from the listing applicant’s group within the past year, their independence is compromised. The Rules often use a threshold (e.g., 5% of the firm’s total revenue) as an indicator of materiality. In contrast, relationships with distant family members in non-management roles, past employment that falls outside the specified look-back period (typically one year), or an immaterial shareholding in a separate entity that does business with the applicant are not usually considered automatic disqualifiers, although they must be considered as part of the overall assessment of independence.

The SEHK Listing Rules impose specific post-listing disposal restrictions on controlling shareholders to promote market stability and investor confidence. These restrictions are structured in two phases over a 12-month period following the date of listing. During the first six months (the ‘first lock-up period’), a controlling shareholder is strictly prohibited from disposing of any interest in the shares they held at the time of listing. During the subsequent six months (the ‘second lock-up period’, from the 7th to the 12th month), the restriction is relaxed, but the controlling shareholder is still prohibited from disposing of their shares if such a disposal would result in them ceasing to be a controlling shareholder. A ‘controlling shareholder’ is generally defined as a person or group of persons controlling 30% or more of the voting power. Therefore, in the second six-month period, they can sell shares as long as their holding remains at or above the 30% threshold.

Statement I is incorrect. The CFA Code and Listing Rules require disclosure to be tailored to the specific circumstances of each listing applicant. Simply copying from previous prospectuses, even successful ones, fails to meet the obligation of ensuring the disclosure is a true, accurate, and complete representation of the specific applicant’s business and risks. Statement II is incorrect. While a sponsor must obtain confirmation from the listing applicant regarding the accuracy of information, this does not absolve the sponsor of its own duties. The sponsor must maintain an attitude of professional scepticism and conduct its own independent due diligence to satisfy itself of the accuracy of the information; reliance cannot be absolute. Statement IV is incorrect. Providing information to cornerstone investors that will not be available to the public creates information asymmetry, which is a key regulatory concern. The principle is that cornerstone investors should not be provided with information over and above what will ultimately be disclosed to all investors in the public offer document. Statement III is correct. According to Listing Rule 2.13(2), a listing document must not omit material facts of an unfavourable nature or fail to accord them appropriate significance. A sponsor has a clear duty to ensure that all material information, whether positive or negative, is disclosed to enable investors to make an informed decision. Therefore, statement III is correct.

According to the Listing Rules and the joint policy statement from the SFC and the SEHK, when a listing applicant is incorporated in a jurisdiction not on the pre-approved list, it must first demonstrate that its home jurisdiction provides equivalent shareholder protection standards to those in Hong Kong. This involves a detailed analysis of how the combination of the applicant’s domestic laws, rules, regulations, and its own constitutional documents (e.g., articles of association) collectively meet the key standards. The SEHK encourages potential issuers and their sponsors to engage in early consultation on this matter before submitting a formal listing application. While re-incorporating in an accepted jurisdiction like the Cayman Islands is a common strategy to bypass this process, it is not the required initial step for assessing the existing jurisdiction. Seeking a waiver for such a fundamental requirement is not a viable path, and it is the HKEX, not the applicant, that prepares and publishes Country Guides for accepted jurisdictions.

A sponsor’s due diligence must be comprehensive and tailored to the specific nature of the listing applicant. Statement I is correct as understanding the applicant’s business model, financial performance, and operational structure is a fundamental part of any due diligence process under the Corporate Finance Adviser Code of Conduct and the Listing Rules. Statement II is correct because for an issuer incorporated in the PRC, Chapter 19A of the Main Board Listing Rules imposes additional requirements. Sponsors must pay special attention to matters such as the validity of property titles, including land use right certificates, as highlighted in HKEX guidance letters. Statement III is correct because the applicant is a mineral company. Chapter 18 of the Main Board Listing Rules sets out specific requirements for such companies, including the necessity of a Competent Person’s Report to assess the mineral resources and reserves, which the sponsor must review as part of its due diligence. Statement IV is incorrect; while a sponsor must exercise professional skepticism and challenge the work of experts, it is not required to possess the technical expertise to independently conduct or verify geological surveys. The sponsor’s role is to ensure that a qualified and independent Competent Person has been appointed and that their report has been prepared in accordance with accepted industry standards. Therefore, statements I, II and III are correct.

Statement I is correct. The Stock Exchange of Hong Kong Limited (SEHK) is the frontline regulator for listing matters and issuers listed on its markets. The SEHK board has delegated its powers and functions concerning listing matters to the Listing Committee. Statement II is correct. The SEHK is subject to the regulatory oversight of the Securities and Futures Commission (SFC). A key aspect of this oversight is that any new or amended Listing Rules proposed by the SEHK must be approved by the SFC before they can take effect. Statement III is incorrect. While the SFC has broad disciplinary powers under the Securities and Futures Ordinance (SFO), the SEHK, through its Listing Committee, has its own powers to apply discipline in respect of breaches of the Listing Rules. The SFC’s role is not exclusive in this regard. Statement IV is correct. The Securities and Futures (Stock Market Listing) Rules (SMLR) establish the dual filing regime, where listing applications are submitted to both the SEHK and the SFC. The ‘Memorandum of Understanding Governing Listing Matters’ facilitates coordination and cooperation between the two regulators in this process. Therefore, statements I, II and IV are correct.

The scenario describes a CEO making a public statement that is overly optimistic and not properly verified, which could be considered false or misleading. We must evaluate which provisions of the Securities and Futures Ordinance (SFO) are relevant.

Statement I is correct. Section 298 of the SFO (the civil market misconduct provision corresponding to the criminal provision in s. 277) prohibits the disclosure of false or misleading information that is likely to induce transactions in securities. A forecast or statement of opinion, like the CEO’s, is covered. If the CEO did not have solid grounds for his statement and was aware of the uncertainty, his action could be deemed reckless, thus constituting market misconduct.

Statement II is incorrect. Stock market manipulation, as defined under section 299 of the SFO, specifically involves entering into two or more transactions in securities with the intention of affecting the price. The CEO’s action involved making a public statement (a disclosure), not executing transactions. Therefore, it does not fall under the definition of stock market manipulation.

Statement III is correct. Part XIVA of the SFO imposes a statutory duty on listed corporations to disclose inside information to the public as soon as reasonably practicable. By issuing a misleadingly positive statement instead of a complete and accurate disclosure of the actual, more nuanced trial results, the company may have failed to comply with its obligation under Part XIVA.

Statement IV is correct. A negligent misrepresentation is defined as a statement that is false or misleading and is made without reasonable care having been taken to ensure its accuracy. The CEO’s failure to consult with the company’s technical experts to verify the preliminary data before making a price-sensitive announcement demonstrates a lack of reasonable care. This concept is a key element in establishing liability for market misconduct. Therefore, statements I, III and IV are correct.

This question assesses the application of the General Principles of the SFC Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission, particularly in the context of a Type 6 licensed corporation (a sponsor). General Principle 6 (Conflicts of Interest) requires a licensed corporation to try to avoid conflicts of interest, and where they cannot be avoided, to ensure its clients are fairly treated. General Principle 9 (Responsibility of Senior Management) stipulates that senior management of a licensed corporation bears primary responsibility for ensuring the maintenance of appropriate standards of conduct and adherence to proper procedures. In a scenario involving a material conflict of interest, senior management’s primary duty is not merely to the client’s commercial objectives but to the integrity of the market and compliance with regulatory requirements. The correct course of action involves a structured process of identifying, evaluating, and managing the conflict. This includes full disclosure to the client and potentially to the regulators, and implementing measures (like ‘Chinese Walls’ or removing the conflicted individual from the project) to mitigate the conflict. Simply proceeding without proper management or resigning without attempting to manage the conflict would likely be seen as a failure to fulfill the firm’s regulatory obligations.

This question assesses the understanding of the requirements for overseas companies from non-accepted jurisdictions seeking to list on the Stock Exchange of Hong Kong (SEHK). Statement I is correct because the core principle, as outlined in the SFC and SEHK joint policy statement, is that an overseas issuer must demonstrate that its home jurisdiction’s legal framework and its own constitutional documents collectively provide shareholder protection standards equivalent to those in Hong Kong. Statement III is also correct; the SEHK explicitly encourages potential issuers from new jurisdictions and their sponsors to consult with it at an early stage to resolve any issues concerning the jurisdiction’s acceptability before a formal application is made. This is a critical step in the due diligence process. Statement II is incorrect because while re-incorporating in an accepted jurisdiction like the Cayman Islands is a common and often practical solution, it is not a mandatory requirement. The SEHK’s framework allows for the acceptance of new jurisdictions if they can meet the required shareholder protection standards. Statement IV is incorrect because the Country Guides prepared by HKEX are specific to each accepted jurisdiction. An applicant from a new jurisdiction cannot simply adopt the arrangements from a guide for another country; it must undertake a detailed analysis to prove how its own legal and regulatory environment meets the Hong Kong standards. Therefore, statements I and III are correct.

According to the Main Board Listing Rules, transparency and timely disclosure are critical following the determination of an IPO’s allocation. The sponsor has a key responsibility to ensure that the issuer promptly informs the public about the outcome of the offer. This is achieved by publishing a formal results announcement. The rules specify a clear timeline for this disclosure, which is the business day immediately following the finalization of the allotment. This ensures that all market participants, including successful and unsuccessful applicants, receive the information simultaneously and can prepare for the commencement of trading. Delaying the announcement, for instance, to wait for the exercise of the over-allotment option, would create information asymmetry and is not compliant with regulatory requirements. While regulatory bodies like the SFC oversee the entire process, the specific procedural step for the public is the timely release of the results announcement through the exchange’s official channels.

Under Hong Kong common law, conspiracy to defraud is an offence that occurs when two or more individuals agree to use dishonest means with the intention of causing economic loss to another party or depriving them of something to which they are entitled. In the context of an IPO, this can include dishonestly concealing material information or falsifying data in a prospectus, which misleads potential investors. This offence does not require the fraudulent act to be completed; the agreement itself constitutes the crime. Separately, Section 9 of the Prevention of Bribery Ordinance (PBO) makes it an offence for an agent (such as a sponsor) to accept an advantage as an inducement for acting against the principal’s (the listing applicant’s) best interests, though in this context, the fraud is against the investing public. Furthermore, under Section 89 of the Criminal Procedure Ordinance, any person who aids, abets, counsels, or procures the commission of an offence by another person shall be guilty of the like offence. This applies to individuals who knowingly assist in the primary wrongdoing.

The explanation breaks down the requirements for the initial listing application submission (Form A1) as per the SEHK Listing Rules. Statement I is correct because the undertaking from the compliance adviser, in the form set out in Appendix 20 of the Listing Rules, is a mandatory document for the initial submission. Statement III is also correct; a final or advanced draft of all requests for waivers from the Listing Rules and relevant ordinances, such as the Companies (Winding Up and Miscellaneous Provisions) Ordinance, must be included with the Form A1. Statement II is incorrect because the confirmation from legal advisers regarding the articles of association is a document required at a later stage, specifically at least four clear business days prior to the listing hearing date, not with the initial application. Statement IV is incorrect as the initial submission requires the ‘Application Proof’ of the listing document, not the ‘final proof’, which is also submitted at the pre-hearing stage. Therefore, statements I and III are correct.

According to the Model Code for Securities Transactions by Directors of Listed Issuers, which is a required standard under the Main Board Listing Rules, directors are prohibited from dealing in the securities of their listed company during specific ‘blackout periods’. For annual results, this period is 60 days immediately preceding the publication date of the results, or the period from the end of the relevant financial year up to the publication date, whichever is shorter. For half-year results, the period is 30 days. In the scenario provided, the financial year ends on 31 December and the annual results are announced on 25 March. The blackout period is the 60 days immediately before 25 March. A transaction on 1 February would fall squarely within this restricted period. Therefore, the director is not permitted to deal in the company’s shares at that time. This rule is designed to prevent directors from trading when they may be in possession of unpublished, price-sensitive information related to the company’s annual performance.

A sponsor’s due diligence for an Initial Public Offering (IPO) must be comprehensive, covering all material aspects of the listing applicant’s business. This is to ensure the business is sustainable, suitable for listing, and accurately described in the listing document. Statement I is correct as verifying key intellectual property is fundamental to assessing the company’s competitive advantage and asset base. Statement II is correct because evaluating risk management and insurance coverage is a critical part of commercial due diligence to understand the company’s resilience to operational risks and potential business interruptions. Statement III is correct as a core component of legal due diligence is to review material contracts and any ongoing or pending legal proceedings that could materially impact the company’s operations or financial health. Statement IV, while related to human resources, is generally considered less of a primary focus for the sponsor’s due diligence for listing purposes compared to material legal, financial, and operational risks, unless there are significant labour disputes that could be material. Therefore, statements I, II and III are correct.

According to the Securities and Futures (Keeping of Records) Rules and the SFC’s Code of Conduct, sponsors are required to maintain comprehensive records related to their sponsor work. This includes minutes from internal committees that decide on new mandates, due diligence records, and key communications. A critical aspect of this requirement is the location of these records. To ensure that the SFC can access these documents promptly for regulatory oversight and inspection, all such records must be kept in Hong Kong. While the rules permit modern storage solutions, such as electronic formats or the use of off-site storage facilities, this flexibility does not override the geographical requirement. The retention period for these records is a minimum of seven years following the completion or termination of the sponsor assignment. Therefore, any record-keeping proposal must be evaluated against its ability to provide regulators with ready access within Hong Kong.

Under the Hong Kong Listing Rules, a controlling shareholder is defined as a person or group of persons who either (i) control 30% or more of the voting rights of an issuer, or (ii) are in a position to control the composition of a majority of the issuer’s board of directors. Statement I is correct because Global Ventures Ltd holds 35% of the shares, exceeding the 30% threshold. Statement IV is correct because Pioneer Fund meets the alternative definition of a controlling shareholder by having the power to control the composition of the majority of the board, regardless of its shareholding percentage being below 30%. Statement II is incorrect; a sponsor’s due diligence duty requires a thorough investigation beyond a mere examination of the shareholder register, especially when a corporate entity is a major shareholder. The sponsor must assess the ownership and control of that corporate entity. Statement III is correct because when a controlling shareholder is a Special Purpose Vehicle (SPV), the HKEX presumes that the shareholders of the SPV are also to be treated as controlling shareholders of the listing applicant. Therefore, statements I, III and IV are correct.

According to Appendix 19 of the Main Board Listing Rules, a sponsor must provide a declaration to the SEHK covering several key areas of its due diligence. Statement I is correct as the sponsor must confirm its satisfaction with the experience, qualifications, and integrity of the applicant’s directors and their ability to fulfill their obligations under the Listing Rules. Statement II is also correct; the sponsor must declare that the applicant has established adequate internal controls and procedures to ensure ongoing compliance post-listing. Statement III accurately reflects the requirement that any forward-looking statements (e.g., profit forecasts) included in the listing document are based on fair and reasonable assumptions after due and careful enquiry. However, Statement IV is incorrect. The sponsor’s declaration is not an absolute guarantee. It is a confirmation that, after making reasonable due diligence enquiries, the sponsor is not aware of any other material facts that should be disclosed. The standard is one of reasonable enquiry, not absolute certainty. Therefore, statements I, II and III are correct.

Statement I is correct. According to paragraph 17.4(a) of the Code of Conduct for Persons Licensed by or Registered with the SFC, the sponsor is responsible for coordinating the overall due diligence process. The use of third-party advisers (such as legal or financial experts) does not absolve the sponsor of its fundamental duty to conduct its own due diligence and form its own professional judgment.

Statement II is correct. This is a direct application of the principle of ‘professional scepticism’ as required by paragraph 17.6(f) of the Code of Conduct. A sponsor must not simply accept information provided by the listing applicant at face value. It must critically assess information, especially when it appears inconsistent with other known facts or market conditions, and maintain a questioning mind.

Statement III is incorrect. The due diligence on directors is much broader than just academic qualifications and criminal records. As outlined in Practice Note 21 to the Listing Rules, the sponsor must inquire into the collective and individual experience, overall competence, and integrity of the directors to ensure they have the character and skills required to lead a listed company.

Statement IV is incorrect. While physical inspection of key assets is particularly important for companies with substantial physical assets (like manufacturing or real estate), it is a fundamental component of due diligence for any listing applicant where such assets are material to its business. It is not strictly limited to specific sectors. For a technology company, this could involve inspecting key data centers or other critical infrastructure. Therefore, statements I and II are correct.

Under Part VIII of the Securities and Futures Ordinance (SFO), the SFC has extensive powers to conduct investigations. When an investigator is appointed, individuals and corporations are obligated to cooperate. This includes providing documents, attending interviews to answer questions, and giving all reasonable assistance. A key tool for the SFC is the ability to apply to a magistrate for a search warrant under section 191 of the SFO. Such a warrant authorises specified persons to enter premises, if necessary by force, to search for, seize, and remove any documents relevant to the investigation. The personnel on the premises are required to produce these documents and are prohibited from altering or removing them. Seized documents can be retained for an initial period of six months, which may be extended. Failure to provide reasonable assistance to an investigator or obstructing the execution of a warrant without a reasonable excuse is a criminal offence. A statutory declaration is typically required when a person is unable to provide the requested evidence, where they must state the reasons for their inability.

This question assesses a candidate’s understanding of a sponsor’s multifaceted obligations under the Hong Kong regulatory framework, including due diligence, resource allocation, internal controls, and the consequences of non-compliance.

Statement I is correct. The sponsor’s declaration to The Stock Exchange of Hong Kong Limited (SEHK) is a formal attestation that adequate due diligence has been performed. Submitting this declaration when due diligence work is poorly documented or incomplete can be considered a false or misleading statement. This may constitute a breach of the Listing Rules and could lead to the sponsor facing criminal liability under section 384 of the Securities and Futures Ordinance (SFO) for providing false or misleading information to the SEHK or SFC.

Statement II is correct. The SFC’s Code of Conduct and the Additional Fit and Proper Guidelines for Sponsors mandate that a sponsor must have sufficient manpower and resources to properly supervise each listing assignment. A Principal being stretched across an excessive number of active transactions is a classic red flag highlighted by the SFC, indicating that the sponsor may lack the capacity to provide adequate supervision and oversight, thereby compromising the quality of the sponsor work.

Statement III is correct. Under the dual-filing regime, the SFC reviews listing application materials concurrently with the SEHK. If the SFC identifies significant deficiencies, such as a failure to conduct and document proper due diligence, it can raise concerns about the sponsor’s competence and fitness and properness. This can result in delays, a suspension of the listing application process, and potential disciplinary action against the sponsor.

Statement IV is correct. The scenario points to systemic weaknesses. A sponsor is required to establish and maintain effective internal systems and controls. The failure to properly document due diligence and the over-allocation of the Principal are indicative of control failures. The Additional Fit and Proper Guidelines for Sponsors require an annual assessment of these internal controls precisely to identify and rectify such shortcomings. Therefore, all of the above statements are correct.

This question assesses understanding of the lock-up provisions for controlling shareholders of a newly listed issuer under the Hong Kong Listing Rules. A controlling shareholder is generally defined as a person or group of persons who are entitled to exercise or control the exercise of 30% or more of the voting power at general meetings. Following a company’s initial public offering, its controlling shareholders are subject to a two-tiered disposal restriction. For the first six months from the listing date, they are prohibited from disposing of any of their shares if such a disposal would result in them ceasing to be a controlling shareholder. For the subsequent six months (i.e., the seventh to the twelfth month post-listing), they are permitted to dispose of shares, but not to an extent that would cause them to fall below the 30% controlling shareholder threshold. In the given scenario, the proposed transaction occurs four months after listing, which is within the first lock-up period. The disposal of a 10% stake would reduce the shareholder’s holding from 35% to 25%, causing him to cease being a controlling shareholder. Therefore, such a disposal is not permitted under the rules.

According to Paragraph 17 of the Code of Conduct for Corporate Finance Advisers, sponsors have a critical duty to conduct reasonable due diligence on information provided by third-party experts. Statement I is correct because sponsors must probe the assumptions and conclusions in an expert report and reconcile them with other information obtained during due diligence. Cross-referencing key data is a fundamental part of this process. Statement II is also correct as sponsors cannot rely on expert reports at face value; they must investigate any inconsistencies or red flags. Discussing discrepancies directly with the expert is a necessary due diligence step. Statement III is incorrect because confirming an expert’s qualifications and independence is only the first step. The sponsor’s duty extends to critically reviewing the substance of the report itself. Simply accepting the content after verifying credentials would be a failure of due diligence. Statement IV accurately reflects the overall standard a sponsor must meet: after conducting their work, they should have no reasonable grounds to believe the expert report is untrue, misleading, or contains material omissions. Therefore, statements I, II and IV are correct.

Under Appendix 14 of the Listing Rules (the Corporate Governance Code), the establishment of a nomination committee is a code provision, not a mandatory rule. This means it operates on a ‘comply or explain’ basis. While it is considered good corporate governance practice for an issuer to have a nomination committee to make recommendations on director appointments, it is not strictly required. If an issuer chooses not to establish one, it must disclose this fact in its Corporate Governance Report within the annual report. Crucially, the issuer must also provide considered reasons for this deviation from the code provision, allowing shareholders and investors to understand the board’s rationale and assess its approach to corporate governance.

The Corporate Governance Code operates on a ‘comply or explain’ basis. This principle provides flexibility for listed issuers but mandates transparency. Statement I is correct because deviating from the code provision that the roles of chairman and chief executive should be separate requires disclosure in the Corporate Governance Report. Statement II is correct because the company must also explain why it deviated from the provision recommending at least four board meetings per year. This is the ‘explain’ part of the principle, requiring ‘considered reasons’. Statement III is incorrect; non-compliance with a code provision of the CG Code is not, in itself, a breach of the Listing Rules. However, failing to disclose and explain the deviation in the Corporate Governance Report would be a breach of the Listing Rules. Statement IV is correct as it accurately distinguishes between the mandatory reporting requirement for code provisions and the voluntary nature of recommended best practices, for which no disclosure of non-compliance is required. Therefore, statements I, II and IV are correct.

According to the Code of Conduct for Persons Licensed by or Registered with the SFC and the Listing Rules (specifically the declaration in Appendix 19), a sponsor has an overarching duty to ensure the listing applicant is suitable for listing and that all material information is disclosed. In this scenario, the discovery about the COO’s past is a significant due diligence finding. Statement I is correct because the COO’s previous association with a company censured for internal control failures necessitates a thorough re-evaluation of the applicant’s own internal controls, particularly in areas the COO will manage. Statement II is correct as this information directly pertains to the assessment of the experience, qualifications, and competence of the senior management team to run a listed company and comply with regulatory requirements. Statement III is correct because the sponsor must consider if this fact is material and should be disclosed to the SEHK to allow for a complete assessment of the applicant’s suitability for listing; omitting it could be a serious breach. Statement IV is incorrect as the COO’s employment history is unrelated to the compliance of expert reports (e.g., property valuation, legal opinions) within the listing document. Therefore, statements I, II and III are correct.

A sponsor’s fundamental duty is to guide a listing applicant towards compliance with the Listing Rules and other regulations. This includes conducting thorough due diligence on all aspects of the applicant, including its directors. According to Chapter 3 of the Listing Rules, the suitability and character of directors are critical. When a sponsor uncovers potentially adverse information, such as a past regulatory censure, it must exercise professional judgment to assess its materiality. If the sponsor deems the issue material, it has an obligation to advise the client to disclose it. Should the client refuse to disclose a material issue, the sponsor faces a significant conflict. The sponsor is required to provide a declaration to the Stock Exchange of Hong Kong (SEHK) (as per Appendix 19 of the Listing Rules) confirming that, after due and careful inquiry, they are satisfied with the applicant’s compliance. Knowingly omitting a material fact would make it impossible for the sponsor to provide this declaration truthfully. In such a scenario, where a fundamental disagreement on disclosure of a material issue cannot be resolved, the sponsor’s primary professional and regulatory obligation is to consider ceasing to act for the applicant.

In the context of a Hong Kong IPO, it is a fundamental requirement and standard market practice to appoint at least two separate firms of legal advisers. One firm acts for the listing applicant (the issuer), and another acts for the sponsor and the underwriters. This separation is crucial to ensure that each party receives independent legal advice tailored to their specific roles, responsibilities, and potential liabilities. The sponsor has a regulatory duty to conduct independent due diligence on the applicant, and their legal counsel plays a key role in this process. Having a single law firm represent both parties would create a significant conflict of interest, undermining the integrity of the due diligence process and the independence of the advice provided to the sponsor. The other options are incorrect as the primary issue is not related to the functions of financial printers, the VDR provider’s capacity, or the direct basis for the reporting accountants’ opinion, but rather the core principle of independent legal representation mandated by market practice and regulatory expectations.

This question assesses the candidate’s understanding of a sponsor’s key obligations to the Stock Exchange of Hong Kong (SEHK) during and after a listing application process, as stipulated in the Listing Rules and the SFC’s Code of Conduct. Statement I is correct; sponsors have a fundamental duty to cooperate in any investigation conducted by the Listing Department. This includes answering questions promptly and openly. Statement III is also correct; a sponsor must report any material information concerning non-compliance with the Listing Rules or relevant laws. This obligation is continuous and survives the termination of the sponsor’s engagement. Statement IV is correct as well; should a sponsor cease to act for a listing applicant before the listing is completed, it must report the reasons for doing so to the SEHK in writing as soon as practicable. Statement II is incorrect because the Form E declaration, which concerns compliance with requirements like public float, must be submitted to the SEHK before dealings in the applicant’s shares begin, not after. Therefore, statements I, III and IV are correct.