Big Banks Fined $100 Million For Hong Kong IPO Failures -- WSJ
15 Março 2019 - 4:02AM
Dow Jones News
By Julie Steinberg
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (March 15, 2019).
Hong Kong's market regulator banned UBS Group AG from the most
senior role on initial public offerings for a year, fining the
Swiss bank and three rivals 786.7 million Hong Kong dollars
(US$100.2 million) in total for cutting corners on IPOs.
On Thursday, the Securities and Futures Commission fined UBS
HK$375 million for due diligence failures in its role overseeing
the 2009 listing of China Forestry Holdings Co., the 2014 debut of
Tianhe Chemicals Group Ltd. and another IPO that wasn't specified.
China Forestry was later liquidated, while Tianhe's shares have
been suspended from trading since March 2015.
Units of Morgan Stanley and Bank of America Corp. were fined
HK$224 million and HK$128 million, respectively, for their work on
the Tianhe IPO. Standard Chartered PLC was fined HK$59.7 million
over China Forestry.
UBS was suspended from acting as a sponsor for one year on IPOs
in the city. In Hong Kong, lead banks on an IPO are known as
sponsors. They conduct due diligence, shepherd companies through a
listing and can be liable for misleading statements in
prospectuses. Sponsor fees are often small, but banks have a better
chance at winning underwriting roles if they become sponsors
first.
Among other things, the regulator said UBS and Standard
Chartered failed to verify China Forestry's forests existed. It
also said UBS and the two U.S. banks didn't follow up after an
interview at Tianhe's offices with a purported representative of
its biggest customer, who refused to confirm his identity and
stormed out of the meeting, according to documents released by the
regulator Thursday.
Under enforcement head Thomas Atkinson, the regulator has dug
into what it has called substandard work by 15 financial firms on
IPOs. Last year, an Asian unit of Citigroup Inc. was fined HK$57
million for due diligence lapses on a 2009 listing.
The regulator has tried to both ensure the integrity of the
markets while still attracting listings to the city and top global
banks to handle them. Arranging IPOs has long been a lucrative
business for banks in the city, and some industry participants say
heavy fines could encourage firms to look to other markets. Bankers
say conducting due diligence in China is difficult and that they
often have no recourse if companies deliberately mislead them.
The fines, which were the largest in total ever imposed for
sponsorship failures, were partly determined by the banks' fees and
other factors. They are a culmination of years of investigation by
the securities regulator. The Wall Street Journal first reported
the Tianhe investigation in 2017.
A UBS spokesman said it took note of the findings and was
pleased to have resolved these "legacy issues." Spokesmen for Bank
of America and Morgan Stanley declined to comment, while a Standard
Chartered spokesman didn't return a request for comment.
Write to Julie Steinberg at julie.steinberg@wsj.com
(END) Dow Jones Newswires
March 15, 2019 02:47 ET (06:47 GMT)
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