UBS Fined About $48 Million Over Work on Hong Kong IPOs
(Bloomberg) -- UBS Group AG has agreed to pay about HK$375 million ($48 million) to settle allegations by Hong Kong’s securities regulator that it mismanaged three initial public offerings in the city, people with knowledge of the matter said.
The IPOs in question were by China Forestry Holdings Co., Tianhe Chemicals Group Ltd. and China Metal Recycling Holdings Ltd., said the people, who asked not to be identified discussing private information. UBS also received a one-year ban from acting as a so-called sponsor on IPOs in Hong Kong, the people said. Representatives for UBS and the Securities and Futures Commission declined to comment.
UBS and Standard Chartered Plc were among investment banks accused by the SFC of carrying out shoddy underwriting work on IPOs that left investors with big losses and dented Hong Kong’s credibility as a financial center. The regulator is expected to announce penalties related to several banks’ IPO work on Thursday, the people said.
Zurich-based UBS said in March 2018 that it had received an 18-month ban on acting as an IPO sponsor in Hong Kong and that it planned to appeal the decision. At the time, the bank also said it had been fined HK$119 million over its work on an IPO, though it didn’t name the deal.
China Forestry, Tianhe Chemicals and China Metal Recycling each had their shares suspended soon after going public amid questions about their finances. China Forestry and China Metal have since been delisted, while trading in Tianhe Chemicals is still halted.
Standard Chartered and UBS were joint sponsors of China Forestry’s 2009 IPO, which raised $216 million. The stock was suspended in 2011 after financial irregularities were discovered, and the company is now in liquidation. The SFC sued the two banks over their work on the deal in 2017, seeking unspecified damages.
UBS was also joint sponsor on China Metal’s 2009 listing, as well as on the 2014 share sale by Tianhe Chemicals.
The companies’ implosions -- coming so soon after their IPOs -- sparked a public outcry and prompted the SFC to scrutinize the quality of banks’ underwriting work. In October 2013, the regulator introduced a new system under which banks that sign off on listings, known as sponsors, will be held accountable if offer documents contain untrue statements.
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