Swiss Investment Bank UBS Suspended From Sponsoring IPOs in Hong Kong

CFOs considering floating shares in Hong Kong have one fewer investment bank to act as sponsor this year and most of 2019 over accounting irregularities found in 2011.

In its 2017 annual report issued on March 9, Swiss bank UBS has revealed that the Hong Kong Securities and Futures Commission issues a decision in March 2018 that “provides for a fine of HKD 119 million [US$15.2 million] and a suspension of UBS Securities Hong Kong Limited’s ability to act as a sponsor for Hong Kong listed initial public offerings for 18 months.”

According to the annual report, “UBS intends to appeal the decision.”

Another major institution, Standard Chartered Bank, also reports in its 2017 annual report that the Hong Kong SFC “has been investigating Standard Chartered Securities (Hong Kong) Limited’s (SCSHK) role as a joint sponsor of an initial public offering of China Forestry Holdings Limited, which was listed on the Hong Kong Stock Exchange in 2009.”

“The SFC is pursuing disciplinary action against SCSHK, and there may be financial consequences for SCSHK in connection with this action,” said the report, which was released in February. Unlike UBS, Standard Chartered no longer has an IPO sponsorship license in Hong Kong.

UBS and Standard Charted were joint sponsors of China Forestry’s initial public offering in Hong Kong nine years ago. Trading in the timber company’s shares was suspended in 2011 and it is now delisted. Its auditor, KPMG, said it had discovered possible accounting irregularities in its accounts.

The SFC had sued UBS, Standard Chartered, KPMG and China Forestry in January 2017 seeking unspecified damages for investors over what it called “market misconduct.” The regulator later withdrew the suit after concluding that its right to bring action against “certain parties was probably time barred.”

The SFC is continuing its investigation, however, and may yet act against Standard Chartered. A senior regulatory official told the Reuters news agency last October that the SFC is probing “substandard work” by 15 companies in their roles as IPO sponsors in Hong Kong, which he said has caused billions of dollars in losses for investors.