HK regulator probing sloppy work by 15 IPO sponsors

HONG KONG • Hong Kong's securities regulator is probing "substandard work" by 15 firms in their roles as sponsors for initial public offerings (IPOs) in the Asian financial hub, a senior official said yesterday.

The investigations are part of the Securities and Futures Commission's (SFC) efforts to stamp out corporate fraud, enforcement head Thomas Atkinson told the Thomson Reuters Pan-Asian Regulatory Summit.

The regulator recently made its largest search and is investigating 136 "active fraud cases", of which 28 are "particularly serious", he added.

Cases of alleged market manipulation and corporate fraud risk tarnishing Hong Kong's reputation as a global financial centre.

Mr Atkinson admitted the city has problems, but maintained that Hong Kong remains "one of the safest markets in the world".

The sloppy work from the 15 unnamed sponsors, as investment banks and securities firms that underwrite listings are called, caused billions of dollars in investment losses, he said.

The shortcomings included basic issues, such as not verifying customers or revenue data for listing candidates, and some behaviour which could be considered "reckless", he added.

The shortcomings included basic issues, such as not verifying customers or revenue data for listing candidates, and some behaviour which could be considered "reckless".

In October 2013, the SFC introduced a strict new regimen to hold sponsors of IPOs to higher standards, and said it would hold banks liable if listing prospectuses were found to have misled investors.

In January, the regulator filed a suit against Standard Chartered, UBS Group and four other parties over the 2009 IPO of timber company China Forestry Holdings.

Mr Atkinson, who joined the regulator in May last year, said the SFC has tapped the resources of three of its divisions to create an operational unit to be able to process more actions.

The so-called ICE team put together its Intermediaries division, which licenses and oversees individuals and securities firms; the Corporate Finance team that handles and regulates listing matters; and the regulator's Enforcement division.

REUTERS

A version of this article appeared in the print edition of The Straits Times on October 12, 2017, with the headline 'HK regulator probing sloppy work by 15 IPO sponsors'. Print Edition | Subscribe