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More FIs Sanctioned By Hong Kong Watchdog In IPO Crackdown

Hong Kong

The Hong Kong Securities and Futures Commission has issued its largest-ever fine, which landed on international investment banks for what the watchdog found to be failings in their initial public offering sponsorship roles.

Reports in the Financial Times on Thursday (March 14) said the SFC sanctioned UBS, Morgan Stanley, Bank of America Merrill Lynch and Standard Chartered a combined $100 million, while UBS Securities’ license in Hong Kong has also been suspended, barring the financial institution from providing corporate finance advisory services for one year.

“The sanctions send a strong and clear message to the market that we will not hesitate to hold errant sponsors accountable for their misconduct,” said SFC Chief Executive Ashley Alder in a statement.

According to reports, UBS, Morgan Stanley and Bank of America were fined in relation to the 2014 IPO of Tianhe Chemicals, which the watchdog flagged for fraud. Subsequently, the financial institutions were scrutinized by the regulator for failing to fulfill due diligence.

UBS and Standard Chartered’s fines were also related to the 2009 IPO of China Forestry. An accounting fraud scandal led to a delisting of the firm, however, and its eventual liquidation. In that case, the SFC said the financial institutions similarly failed to adequately validate the company’s finances.

“The SFC also found that UBS’s failures in China Forestry’s listing application were attributable to the neglect on the part of Cen [Tian, UBS banker], in his capacity as a sponsor principal, of his supervisor duties,” the SFC stated.

The publication noted that the SFC’s fine represents a tightening grip on foreign financial institutions after the regulator faced criticism for being too lenient on such international bodies.

In a statement, Standard Chartered said it welcomes “the opportunity to resolve this case with the SFC,” while UBS said the financial institution “takes note” of the regulator’s conclusions. Morgan Stanley and Bank of America both declined to comment on the matter, reports said.

UBS first revealed the ban and fine from Hong Kong authorities in its annual report earlier this month.



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