China’s largest investment bank CICC says sorry after disciplinary action by Hong Kong regulator on breaching city’s takeover code
- Two CICC associate units failed to promptly disclose hedging trades in 2019 in companies where the group acted as takeover adviser
- CICC has apologised for the oversight, promised steps to tighten reporting and compliance
The investment banking group, ranked fourth last year in Asia outside Japan in mergers and acquisitions advisory, admitted its units failed to promptly disclose trading involving shares of Dalian Port and Maanshan Iron & Steel in June last year.
The offence happened at the same time the group’s Hong Kong unit acted as financial adviser to Broadford Global in its takeover offer for Dalian Port, and to Baosteel in its offer for Maanshan, the Securities and Futures Commission said in a statement on Thursday.
The CICC group has apologised for its oversight on the disclosure obligations of its delinquent units, adding that it takes the matter extremely seriously. It has also taken steps to improve compliance and tighten reporting rules.
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Xu had departed from the investment bank at the time of his punishment. CICC itself was not sanctioned.
CICC is China’s first investment bank and dubbed the nation’s version of Goldman Sachs for its influential executives and leading role in the initial public offerings of state-owned enterprises. It ranked behind Goldman, Citigroup and JPMorgan last year in the region in M&A advisory works, according to Dealogic.
CICC did not immediately respond to an email inquiry from the Post on the SFC’s disciplinary action.
In Thursday’s statement, the SFC said it found that a CICC unit traded in Dalian Port’s A shares for exchange-traded fund hedging and index-related hedging trades between June 4 and 25 last year. The unit also made similar hedging trades on Maanshan’s A shares between June 3 and 25.
Another CICC unit conducted swap-hedging trades involving the A shares of Dalian Port and Maanshan between June 3 and 26.
The two units were deemed as “associates” in relation to the group’s advisory role in both takeover cases, the SFC said. Their trades required public disclosure on the next day after the transaction under Hong Kong’s takeover rules, it added. They only disclosed the transaction at the end of the month after consulting the SFC.
“Timely and accurate disclosure of information concerning relevant dealings, including those of advisers, plays a fundamental role in ensuring that takeovers are conducted within an orderly framework, and the integrity of the markets is maintained,” the commission said.
