November 9, 2016 / 4:18 AM / 2 years ago

After StanChart and UBS, Hong Kong regulator warns of more IPO sponsor probes

HONG KONG (Reuters) - Investors can expect to see more regulatory probes into the sponsorship of stock listings in Hong Kong, the city’s top markets enforcement official said, underlining a crackdown that has already led to two global banks being investigated.

A Standard Chartered bank branch in Singapore October 11, 2016. REUTERS/Edgar Su

Speaking at the Thomson Reuters Pan-Asian Regulatory Summit on Wednesday, Thomas Atkinson, recently appointed to head up enforcement at Hong Kong’s Securities and Futures Commission (SFC), said the regulator had created a temporary team dedicated to monitoring misconduct for initial public offerings.

“Corporate fraud and malfeasance pose one of the greatest threats to the integrity of the Hong Kong market,” Atkinson said. “We have received a steady stream of referrals from our corporate finance division.”

“Of particular note are those involved in misconduct of IPO sponsors: to put it very lightly, the conduct and level of professionalism demonstrated by some sponsors has left a lot to be desired,” the enforcement chief said, without disclosing any sponsor names.

“You can expect to see some more of these cases and hopefully we’ll hold these firms and senior management accountable.”

Atkinson’s tough stance comes in the wake of Standard Chartered (STAN.L) saying last week that the SFC is investigating its role as a joint sponsor of an IPO in 2009, and could take action against its Hong Kong unit.

That disclosure came just days after UBS (UBSG.S) also said the SFC was investigating its role as sponsor of certain listings in the city. USB could potentially face financial penalties, and could even be temporarily stripped of its ability to provide coveted corporate finance advisory services in Hong Kong.

The banks did not identify the IPOs at the center of the probes.

In 2009, Standard Chartered’s Hong Kong brokerage unit acted in only two IPOs in 2009 including the $216 million listing of timber company China Forestry Holdings Co Ltd, a listing also sponsored by UBS.

Trading in China Forestry has been suspended since January 2011, and the company is now in liquidation and delisting after the company’s auditor said it had found possible accounting irregularities.


With Hong Kong the world’s hottest market for IPOs, scrutiny of listings is crucial to retain the bourse’s attractiveness to investors. Under SFC regulations, banks can face fines and other sanctions if the listing documents of companies they are sponsoring for a market debut mislead investors.

SFC enforcement chief Atkinson said on Wednesday he has carried out a strategic review of enforcement priorities and concluded the regulator needs to focus on quality and “high-impact cases”.

“At the top of our priorities is listed company issues. We are particularly concerned about risk posed by corporate fraud and malfeasance,” Atkinson said, adding cases of fraud and corporate malfeasance have “severely damaged” Hong Kong’s reputation.

He also said an investigation into Chinese solar energy company Hanergy Thin Film (0566.HK), the subject of a high-profile investigation for alleged market manipulation, was still ongoing.

Atkinson was appointed in May, having previously served as the head of enforcement at Canada’s Ontario Securities Commission. He replaced Mark Steward, who left in September 2015 to join Britain’s Financial Conduct Authority.

Atkinson is shaking up the enforcement division, bringing in new directors and shifting the division’s focus, according to people briefed on the matter, who did not want to be to be named as they were not authorized to speak to the media.

Under Steward, the division cast its net widely, pursuing even minor transgressions, said lawyers and regulatory experts.

Atkinson, however, is keen to wrap up many of the more than 1,000 investigations the SFC opened prior to his appointment in a bid to focus on high-profile cases, the people said.

Reporting by Michelle Price; Writing by Sumeet Chatterjee; Editing by Kenneth Maxwell

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