The Securities and Futures Commission is expected to ban pre-deal research reports for initial public offerings, according to a bulletin from law firm Herbert Smith in Hong Kong. The bulletin stated the SFC will forge ahead with a ban despite criticisms from many market participants that one would deny investors and fund managers important information in the lead-up to and during an IPO. CK Chan, spokesman at the SFC, said the SFC has not issued the conclusions of its consultation yet and declined to comment further.

Pre-deal research reports refer to reports that profile an issuer before an offer is made. Such reports are typically prepared by the intermediaries involved in the offer, such as the underwriter or issue manager, to stimulate interest in the offer. In August, an SFC consultation proposed to either ban all written pre-deal research by analysts connected with the sponsors, managers or underwriters of an offering, or if leakage results in media coverage, to require publication of pre-deal research by the issuer of the research in the prospectus. The feedback period ended on Nov. 30.

Mark Johnson, partner at Herbert Smith, is unsure when the SFC ban will be announced but said he heard of the plans after talking to investment firms. He added that it will be good news for compliance departments however, because "leakage" of information into the market is a particular problem for Hong Kong. Jeremy Lam, partner at Deacons law firm in Hong Kong, is less convinced however. He thinks the SFC will opt to regulate pre-deal research, rather than go for an outright ban. Lam added that because it is permitted in the U.K., the SFC will shy away from leading the way on the issue.