Hong Kong’s SFC fines CCB International Capital for failing duty as IPO sponsor
The regulator has imposed fines on a number of investment banks this year as part of the clean up to turn Hong Kong into a listing hub for tech giants
The Securities and Futures Commission on Monday reprimanded and fined CCB International Capital HK$24 million (US$3.06 million) for failing its duty as a sponsor in the initial public offering application in Hong Kong of Fujian Dongya Aquatic Products, the latest in a spate of disciplinary actions against investment banks.
The SFC found that CCB International did not conduct all reasonable due diligence on Dongya before submitting the seafood company’s application to be listed on the stock exchange’s main board in March 2014.
It found, according to a statement, that while around 90 per cent of Dongya’s turnover between 2011 to 2013 were derived from its sales to overseas customers, the investment bank did not complete the due diligence on the company’s customers agreements or interviewed some of these customers face-to-face. Dongya ultimately did not list.
“The SFC’s investigation also revealed that one of the members of CCB International Capital’s transaction team had raised concerns about the genuineness of the signatures on the indemnity agreements,” the statement said. The review of the agreements showed that some of them were signed by the same person on behalf of different customers.
In deciding the disciplinary sanction, the SFC took into account the CCB International’s improvement on internal controls. It also “found no evidence that the breaches and deficiencies identified above were deliberate, intentional or reckless” as the investment bank cooperated fully with the investigators.
“The SFC would like to remind sponsors that before submitting a listing application to the stock exchange of Hong Kong, they should have performed all reasonable due diligence to gain a thorough knowledge and understanding of the listing applicant’s business …” said the statement.
The regulator has fined a number of investment banks this year, including Citigroup, UBS and Standard Charted Bank as part of the clean up and reform programme to turn Hong Kong into a listing hub for technology giants.
In May, a record HK$57 million fine was imposed on Citigroup Global Markets Asia for failing in its duty as an IPO sponsor for Real Gold Mining.
Swiss banking giant UBS said in its annual report in March that it was fined HK$119 million and barred from sponsoring IPOs for 18 months. UBS, which has appealed against the fine and licence suspension, can continue to sponsor deals until a decision is reached on the appeal.
Both UBS and Standard Chartered disclosed in 2016 that they were under investigation by the SFC for their roles as sponsors of unidentified IPOs.