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After UBS Ban, Hong Kong to Punish Other `Reckless' IPO Sponsors

Pedestrians cross a road in the Central district of Hong Kong, China, on Wednesday, Nov. 22, 2017. Hong Kong's benchmark equity gauge rose above the 30,000 level for the first time in a decade as Tencent Holdings Ltd. extended its rally and Chinese financial shares climbed.


(Bloomberg) -- The enforcement chief of Hong Kong’s securities regulator said some sponsors of initial public offerings in the city have been “extremely reckless,” signaling more penalties to come after the regulator slapped a ban on UBS Group AG’s local unit this month.

The Securities and Futures Commission is seeking a range of penalties, including large monetary fines, and will announce more results of its investigation into 15 firms in the next six months, Tom Atkinson, the regulator’s head of enforcement, said at a forum on Wednesday. The SFC wants to hold individuals as well as the firms accountable, Atkinson said.

Hong Kong is seeking to improve underwriting standards after a series of corporate scandals in recent years that saddled stock investors with losses and dented the city’s reputation as a premier financial hub. Last week, UBS said it had been banned from sponsoring Hong Kong IPOs for 18 months and fined HK$119 million ($15.2 million) by the SFC for work on an IPO it didn’t identify. UBS said it will appeal the decision.

The Hong Kong regulator recently reviewed the work of 31 sponsors from 2013 to 2017 and found deficiencies in their work, particularly in due diligence, Julia Leung, deputy chief executive officer at the SFC, said at the same forum.

Sponsors ignored red flags, including whether invoices and payments matched, and were too reliant on third parties, Leung said. They need to ask more questions of the companies they bring to market, she said, adding that the regulator returned around 44 IPO applications since 2013 due to concerns over substandard work.

Scrutiny of sponsors has increased in Hong Kong after a system was introduced in 2013 that holds senior banks on a deal accountable if offer documents contain untrue statements. The regulator will issue a circular later this month with additional guidance, Leung said.

To contact the reporter on this story: Benjamin Robertson in Hong Kong at

To contact the editors responsible for this story: Sam Mamudi at, Michael Patterson

©2018 Bloomberg L.P.

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