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Due diligence UBS fined and denied right to sponsor IPOs in Hong Kong


The Hong Kong SFC accused UBS of substandard due diligence and failure to address red flags. 


Swiss bank UBS has been fined HK$375 million (CHF48 million) for irregularities involving three IPOs it had help list on the Hong Kong stock exchange in 2009. Its licence to sponsor IPOs in the city was also suspended for one year.

On Thursday, Hong Kong’s Securities and Futures Commission (SFC) announced the measures against UBS and its local subsidiary for failing to exercise due diligence as a sponsor for several IPOs (initial Public Offerings). A sponsoring bank normally receives higher fees than other participating institutions, but also has to guarantee the authenticity of the information about a company.

According to the Reuters news agency, the IPOs UBS was involved in include China Forestry and Tianhe Chemicals. A third unnamed company is believed to be China Metal Recycling, which is now defunct.

“The sanctions send a strong and clear message to the market that we will not hesitate to hold errant sponsors accountable for their misconduct,” said Ashley Adler, CEO of the SFC.

UBS agreed to an independent review of its sponsor business.

Other banks fined by the SFC for similar violations include Morgan Stanley (HK$224 million), Merrill Lynch (HK$128 million) and Standard Chartered (HK$59.7 million).

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