HONG KONG (BLOOMBERG) - Hong Kong's stock exchange is probing whether investors violated rules by placing multiple subscriptions to improve their odds of participating in the initial public offering of New Horizon Health.
Hong Kong Exchanges & Clearing (HKEX), through share registrar Tricor, has asked brokers involved in the IPO to provide the names and identity card numbers of retail investors alloted stocks, according to people familiar with matter, who asked not be identified discussing private information.
HKEX asked brokers to confirm they have "followed proper procedure and have rejected multiple or suspected multiple applications," according to the email message sent to the firms that was obtained by Bloomberg.
The exchange is responding to rising complaints over multiple applications in recent popular IPOs such as Yidu Tech, Kuaishou Technology and the withdrawn Ant Group deal. Each attracted more than a million subscribers in a city of about seven million people. More than 11,000 multiple applications were found and rejected in the New Horizon sale, according to a Feb 17 company announcement detailing the IPO.
"It's rare for HKEX to make such a request, especially for these mega IPOs," said Tom Chan Pak-lam, chairman of the Institute of Securities Dealers. The bourse may want to address complaints about multiple subscription also in previous deals, he said.
It's unclear what the remedy will be if the exchange determines violations on multiple orders. It may prove difficult to reverse allocations given that some investors may have already sold.
Currently, Hong Kong's brokers submit spreadsheets of their IPO placements to the exchange's Listing Division for review. But there are no controls that the data provided aren't modified and the process also consumes a considerable amount of time, the exchange said in a November paper.
The bourse has proposed a digital platform, known as FINI, to stamp out multiple applications. This will close a loophole where investors register accounts with different brokers for the same IPO. A comment period on the plan ended in January and the platform could be up and running at the earliest in the second quarter of 2022, according to the exchange.
Spokespeople at the bourse and the city's Securities and Futures Commission declined to comment. Representatives at New Horizon couldn't be reached for a comment. The probe was reported earlier by the Hong Kong Economic Journal.
The Chinese cancer screening biotech company more than tripled in its debut on Thursday (Feb 18), after raising US$263 million (S$349 million). As few as 2 per cent of the applicants in one board lot were alloted shares. Even international offerings where institutional investors place orders were so heavily over-subscribed that there were hardly enough shares to be distributed among major funds, according to a company filing.
The city's financial regulator, the SFC, earlier this month proposed to tighten rules for brokerages handling stock and bond sales to clamp down on inflated orders and the chase after higher fees in the Asian financial hub.