Brokerage firms face scrutiny for potential breach in regulations

The Securities and Futures Commission is conducting a thematic review of eight brokerage firms that provided an exceptionally high level of margin financing for new shares subscription, said its chief executive Julia Leung Fung-yee.

The review aims to examine whether they violated risk management regulations, ensured proper IPO financing practices, and set loan limits to prevent excessive financing, Leung said.

A number of new stocks’ retail tranches have been oversubscribed thousands of times after the launch of the Fast Interface for New Issuance, a digital platform that reduces the time gap between pricing and trading, as well as the required pre-funding for initial public offerings.

Leung expressed concerns about whether the substantial oversubscription of certain IPOs reflects genuine demand, noting that some newly listed stocks have dropped below their offering price post-listing.