Hong Kong’s SFC imposes HK$375m fine on UBS over sponsor failures

Maria Nikolova

The Hong Kong regulator also partially suspended UBS Securities Hong Kong’s licence to advise on corporate finance for one year.

Hong Kong’s Securities and Futures Commission (SFC) has just announced the imposition of a HK$375 million fine on UBS AG and UBS Securities Hong Kong Limited for failing to discharge their obligations as one of the joint sponsors of three listing applications: China Forestry Holdings Company Limited, Tianhe Chemicals Group Limited, and another listing application. (The SFC will not disclose the detailed findings which led to its disciplinary action against UBS in relation to the Other Listing Application until the conclusion of its disciplinary proceedings against these other parties).

The regulator also partially suspended UBS Securities Hong Kong’s licence to advise on corporate finance for one year, so that UBS Securities Hong Kong will not act as a sponsor for listing application on the Stock Exchange of Hong Kong Limited (SEHK) of any securities.

The SFC has also suspended the licence of Mr Cen Tian for two years. He was approved to act as a sponsor principal and an executive officer of UBS AG during the period from 11 October 2007 to 29 May 2013 and from 4 October 2007 to 27 May 2015 respectively. Cen has also been licensed to carry on Type 6 (advising on corporate finance) regulated activity under the SFO as a representative of UBS Securities Hong Kong since 7 June 2012. The suspension of his license is for failing to discharge his supervisory duties as a sponsor principal in charge of supervision of the execution of China Forestry’s listing application.

The SFC’s investigations show that UBS has failed to make reasonable due diligence enquiries in relation to a number of core aspects of China Forestry’s business. Inter alia, the bank is found to have failed to verify the existence of China Forestry’s forestry assets and to have failed to verify China Forestry Group’s forestry rights. The bank did not verify properly China Forestry’s compliance with relevant laws and regulations.

Regarding Tianhe’s listing application, the SFC’s investigations have found that UBS, one of the joint sponsors in Tianhe’s listing application, had failed to follow the specific guidelines on due diligence interviews in paragraph 17.6 of the Code of Conduct.

In determining the penalties, the SFC considered that the deficiencies identified in relation to UBS are extensive. However, UBS agreed to engage an independent reviewer to review its policies, procedures and practices in relation to the conduct of its sponsor business.

Mr Ashley Alder, the SFC’s Chief Executive Officer, said: “The outcome of these enforcement actions for sponsor failures – particularly failings when conducting IPO due diligence – signify the crucial importance that the SFC places on the high standards of sponsors’ conduct to protect the investing public and maintain the integrity and reputation of Hong Kong’s financial markets. The sanctions send a strong and clear message to the market that we will not hesitate to hold errant sponsors accountable for their misconduct.”

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