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March 15, 2019

UBS and rivals fined over IPO sponsor failings in Hong Kong

UBS, Standard Chartered Securities, Morgan Stanley Asia, and Merrill Lynch Far East have agreed to pay a combined $100m to the Securities and Futures Commission (SFC) to resolve allegations of failures relating to sponsorship of Hong Kong IPOs.

The highest fine was imposed on UBS. The Swiss bank, which was hit with a fine of HK$375m ($48m), was accused of failing in its role of sponsor to the IPOs of China Forestry in 2009, Tianhe Chemicals Group in 2014, and another unnamed company.

Trading in China Forestry shares was suspended 14 months after its IPO following revelations of irregularities. The company was eventually dissolved.

Trading in Tianhe shares has been suspended since 2015.

In the case of China Forestry, UBS was charged with failing to verify the firm’s assets and its compliance with laws.

The SFC also alleged that UBS failed to make adequate due diligence inquiries on its customers.

Standard Chartered was charged on similar grounds in the China Forestry case and fined HK$59.7m.

UBS was also accused of failing to conduct due diligence interviews and address red flags raised in an interview during Tianhe listing.

The failures resulted in the suspension of UBS Securities Hong Kong’s licence for one year.

At the same time, the licence of UBS managing director Cen Tian has been suspended for two years for lapses in his supervisory role in the China Forestry IPO.

Morgan Stanley and Merrill Lynch were also charged in the Tianhe case and fined HK$224m and HK$128m, respectively.



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