Hong Kong’s securities regulator takes listings sponsors to task, imposes fines of U$24.7m in 2018
- Securities and Futures Commission fines Citigroup Global Markets Asia HK$57 million for its role as sponsor of Real Gold Mining
The Securities and Futures Commission stepped up its vigilance last year, imposing heavy fines on big investment banks for failing in their duties as sponsors of new company listings, according to a report by the law firm Freshfields Bruckhaus Deringer.
The city’s securities regulator imposed a total of HK$194 million (US$24.7 million) in fines in 2018, down 61 per cent from the previous year.
Excluding the record HK$400 million penalty slapped in November 2017 on HSBC Private Bank (Suisse) for misconduct relating to the sale of structured products linked to Lehman Brothers, last year’s total was double the HK$97 million in 2017 and almost three times more than the HK$67.93 million penalties in 2016, Freshfields’ study of SFC’s enforcement records showed.
Citigroup Global Markets Asia was fined HK$57 million for its role as sponsor of Real Gold Mining’s IPO in February 2009. The company’s shares were suspended from trading two years later because of financial mismanagement.
Thomas Atkinson, executive director of the SFC and head of its enforcement division, said in an October speech that the SFC was investigating 30 cases of suspected sponsor misconduct involving 28 sponsor firms and 39 listing applications.
The Swiss investment bank UBS said in its annual report in March last year that it had been fined HK$119 million and blocked from sponsoring IPOs for 18 months. It added that the decision was not yet final as it would appeal.
The Freshfields study also showed that the SFC was undertaking fewer investigations.
In the first nine months of the current financial year from April to December 2018 the number of cases had fallen to 180, compared to 280 in financial year April 2017 to March 2018, and 414 cases in the 2016-2017 period.
Georgia Dawson, Freshfields’ Asia managing partner, said that the SFC’s focus was on bigger cases and a “less is more” approach was reflected in the watchdog’s fines.
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“The total amount of fines that the SFC imposed in 2017 and 2018 at about HK$691 million is more than three times the total amount of fines that it imposed in 2014, 2015 and 2016 together at about HK$201 million,” Dawson said.
The SFC’s Atkinson has said his approach was to focus on the biggest cases, particularly corporate frauds and failure of listing sponsors.
The commission this year will sue 60 individuals and companies for malpractices.
The SFC in December 2017 joined hands with Independent Commission Against Corruption to raid the offices of Convoy Global Holdings and its related companies. This led to the arrest of four people, including Convoy’s former chairman, Quincy Wong Lee-man.
