Editorial | Investor identification system will ensure the IPO game is not rigged
- Hong Kong’s financial market has a brighter future than ever, but to achieve its full potential, there must be a level playing field
One of the oldest tricks to try to gain hot-ticket initial public offering (IPO) allotments is to have every adult member of your family to subscribe. Another is for a punter to subscribe through multiple brokers. By virtue of its being a major global hub for IPOs, many investors in Hong Kong – and on the mainland – know all about those tricks, and more. The first is arguably not something that local regulators can or should do much about. The other, though, is a blatant loophole that has been allowed to last for so long – until now.
The real issue is one of fairness. Some of those who subscribe through multiple brokers may be wealthy individuals, or people who have access to massive funds through borrowings that give them an unfair advantage over ordinary and rule-following investors.
If Hong Kong is to maintain its status as a premier financial centre, it must ensure a level playing field for everyone.
By next year, regulators will compel brokerages and financial institutions to submit clients’ names and identity document information to Hong Kong Exchanges and Clearing, the bourse operator, when placing orders to buy or sell shares. This will not only shut the IPO loophole, but also deter financial misconduct generally by making it easier for regulators to pick out those who break the rules.
Hitherto, only the brokers’ names are used in trading systems, and the identities of clients are provided only when requested by the Securities and Futures Commission, the local securities watchdog.
