UBS banned from HK IPOs; other banks slapped with fines

Hong Kong - SFC cracking down on lenders not properly carrying out duties as sponsor

Hong Kong's securities regulator banned UBS on Thursday from sponsoring initial public offerings (IPOs) domestically for a year for failures in that role in three IPOs, the first major bank involved in stock listings to face such action in the city.
The Securities and Futures Commission (SFC) also fined the Swiss bank HK$375 million ($47.77 million), the largest fine it has given to a sponsor.
It fined Morgan Stanley HK$224 million, Merrill Lynch HK$128 million and Standard Chartered HK$59.7, all for failures when sponsoring IPOs, for a total of HK$786.7 million ($100.2 million).
In the wake of a slew of scandals among newly-traded firms earlier this decade, the SFC has been cracking down on banks not properly carrying out their duties as sponsor.
In October, it said it had issued nine IPO sponsors with "decision notices" informing them of intended enforcement measures.
The IPOs in question were those of China Forestry, sponsored by UBS and Standard Chartered, and Tianhe Chemicals, sponsored by UBS, Merrill Lynch and Morgan Stanley.
UBS was also fined for failing to discharge its duties in a third IPO, which the regulator did not name.
"The outcome of these enforcement actions for sponsor failures - particularly failings when conducting IPO due diligence - signify the crucial importance that the SFC places on the high standards of sponsors' conduct to protect the investing public and maintain the integrity and reputation of Hong Kong's financial markets," said Ashley Alder, CEO of the SFC, in a statement.
The regulator suspended the licence of UBS banker Cen Tian for failing to discharge his duties as sponsor principal in charge of the IPO of China Forestry, it said.
"UBS takes note of the findings of the Hong Kong Securities and Futures Commission's (SFC) investigations. We are pleased to have resolved these legacy issues relating to our Hong Kong IPO sponsorship licence. We look forward to continuing to service our clients in Hong Kong," UBS said in a statement. - Reuters
Morgan Stanley and Bank of America Merrill Lynch declined to comment.
"We welcome the opportunity to resolve this case with the SFC, which stems from matters arising over 10 years ago. We note that on 8 January 2015, Standard Chartered Group announced the closure of institutional cash equities, equity research and equity capital markets activities [including IPO sponsor activities]," StanChart said in a statement.
"Going forward, the Bank remains committed to ensuring that it has a robust controls framework in place to ensure compliance and continues to invest in improving standards across all our business segments," the British bank said.