Many Hong Kong-based private equity fund managers have participated as sponsors in SPAC deals in the United States. In January 2022, with the adoption by the Hong Kong Stock Exchange of the new Chapter 18B of the Listing Rules, the Hong Kong securities market is now open to SPACs, Davis Polk reports. Among other things, the rules require that at least one of the SPAC promoters holding no less than 10% of promoter shares must be a corporation, or controlled by a corporation, with a Type 6 (advising on corporate finance) or Type 9 (asset management) license granted by the Securities and Futures Commission (the SFC). As such, fund managers with Type 9 SFC licenses play a prominent role in this new regime.
The Davis Polk client update reviews Hong Kong regulatory requirements applicable to SFC-licensed fund managers and the related licensed individuals in the SPAC context. The focus is on fund managers that sponsor or promote SPACs and analyze the relationship, transactions and potential conflicts of interest between funds that they manage and such SPACs. Issues covered include (a) allocation of investment opportunities, (b) participation by client funds in SPAC transactions, and (c) the impact of licensed individuals’ dual roles on their fitness and properness. Read more.
