SFC slaps more fines over sponsor failures – Standard Chartered, Morgan Stanley, Merrill Lynch targeted too
Sponsor failures result in heavy fines for Standard Chartered Securities, Morgan Stanley Asia, and Merrill Lynch Far East.
Shortly after announcing the disciplinary action against UBS today, the Securities and Futures Commission (SFC) has unveiled the imposition of rather heavy penalties against several other banks over sponsor failures.
The listings at the core of the regulatory matters concern China Forestry Holdings Company Limited and Tianhe Chemicals Group Limited. Standard Chartered Securities gets a fine of HK$59.7 million, Merrill Lynch Far East Limited will have to pay a penalty of HK$128 million, whereas Morgan Stanley Asia Limited got slapped with a fine of HK$224 million.
Standard Chartered Securities (Hong Kong) Limited is fined for failing to discharge its obligations as one of the joint sponsors in relation to the listing application of China Forestry Holdings Company Limited in 2009. The SFC’s investigations concluded that Standard Chartered Securities had failed to make reasonable due diligence enquiries in relation to several core aspects of China Forestry’s business.
In deciding on the sanctions, the SFC took into account that the deficiencies in the due diligence conducted by Standard Chartered Securities are significant, i.e. it has failed to properly examine and verify crucial aspects of China Forestry’s business such as its forestry assets, logging activities, insurance coverage and customers. However, Standard Chartered Securities cooperated with the SFC in accepting the disciplinary actions and the SFC’s findings and regulatory concerns.
Merrill Lynch Far East Limited has been found to have failed to discharge its obligations as one of the joint sponsors in relation to the listing application of Tianhe Chemicals Group Limited in 2014.
The SFC’s investigations revealed that Merrill Lynch had failed to follow the specific guidelines on due diligence interviews under paragraph 17.6 of the Code of Conduct.
In determining the penalty for Merrill Lynch, the SFC took into account that Merrill Lynch allowed Tianhe to control the due diligence process and failed to take appropriate steps to address the red flags raised in and after the customer interviews. However, Merrill Lynch cooperated with the SFC in accepting the disciplinary action and the SFC’s findings and regulatory concerns. The company has also agreed to engage an independent reviewer to review its policies, procedures and practices in relation to the conduct of its sponsor business.
Morgan Stanley Asia Limited is fined for failing to discharge its obligations as one of the joint sponsors in relation to the listing application of Tianhe Chemicals Group Limited in 2014. The SFC’s investigations determined that Morgan Stanley had failed to follow the specific guidelines on due diligence interviews under paragraph 17.6 of the Code of Conduct.
In deciding on the sanctions, the SFC took into account, inter alia, that as a sponsor, Morgan Stanley has a clean disciplinary record and that the company cooperated with the SFC to resolve the SFC’s regulatory concerns.
