Hong Kong Watchdog Briefs Banks on Raid Protocol as IPO Scrutiny Intensifies

Hong Kong's securities regulator has briefed investment banks on how staff should behave during a raid, according to two people familiar with an industry meeting, in a sign of tightening oversight of the territory's booming share-sale market.

Securities and Futures Commission chief executive Julia Leung and Kenneth Luk, a senior director in its enforcement division, attended the August 17 meeting with investment bank executives, the people said. Luk set out what firms should do when regulators arrive with search warrants.

What banks were told

According to the people, brokers were instructed to train front-desk staff to handle search warrants without delay, walk search teams to designated areas and keep private rooms available away from other visitors. They were also told to provide same-day access to employee emails and computer systems, and to open an internal investigation if news of a raid reaches the media.

The people were not authorised to speak publicly and declined to be identified. The guidance has not previously been reported.

In a statement, the SFC said it has issued no written directives on raid guidance, but that it periodically shares its expectations and practical protocols with market participants to promote better internal controls and compliance. It declined to discuss the August meeting.

Focus on share sales

Share sales have emerged as a central concern for regulators this year, the people said. Attendees were told banks and advisers should weigh market capacity, select quality issuers and maintain strong internal controls.

About eight raids on brokerages or funds have taken place in Hong Kong this year, a sharp increase on previous years, according to the people. Those searches have included the Hong Kong arms of Citic, Guotai Junan, CCB International and China Securities International, none of which commented at the time.

The heightened scrutiny comes as Hong Kong experiences an unprecedented wave of share sales, with Chinese artificial intelligence, robotics and technology firms seeking funding. At least 500 companies are preparing listings, a figure that excludes those that have filed confidentially. Funds raised through initial public offerings and secondary placements rose 76% year on year to HK$651 billion ($83.5 billion) in the first eight months of 2026, exchange data show.

Shifting enforcement priorities

Since December, authorities have spoken more openly about how the pursuit of deal volume can weaken sponsors' gatekeeping role. At the meeting, SFC officials said their focus had moved from conventional financial fraud towards complex listing abuses that undermine market integrity, the people said.

Current priorities include the misuse or diversion of share-sale proceeds by company management and the fabrication of demand during placements — for example, issuers offering implicit guaranteed returns, lending money for share subscriptions or using commercial arrangements to fund demand.

In an unusual step, the SFC suspended trading in eye-treatment developer Cloudbreak Pharma on Thursday, saying it had serious concerns that the company's IPO may have been rigged to create an artificial impression of demand. The California-based firm, which raised $80 million in its July listing, did not immediately respond to a request for comment.

Huatai International, backed by a Chinese state-owned firm, is among the most recent brokers searched, according to one of the people and two other sources familiar with the August action. The regulator is examining whether insider trading occurred in certain clients' transactions involving the US-listed shares of online broker Futu, two of the sources said. Huatai International declined to comment, while Futu did not immediately respond to a request for comment.