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[HONG KONG] Standard Chartered Plc said Hong Kong's securities regulator is investigating its role as a joint sponsor of an initial public offering (IPO) in 2009 and could take unspecified action against the British lender's Hong Kong unit.
The disclosure of the probe on Tuesday by Standard Chartered comes days after Swiss bank UBS also said Hong Kong's Securities and Futures Commission (SFC) is investigating its role as sponsor of certain unnamed stock market listings in the city.
In its earnings release, Standard Chartered said the SFC had informed the bank that it intended to take action against Standard Chartered Securities (Hong Kong) Ltd (SCSHK) in relation to its role on the IPO and that such action, if taken, may result in financial consequences for SCSHK.
The British bank did not identify the IPO concerned.
Standard Chartered's Hong Kong brokerage unit, previously called Cazenove Asia Ltd, acted in only two IPOs in 2009, the US$216 million listing of timber company China Forestry Holdings Co Ltd and China XLX Fertiliser Ltd, according to stock exchange data. The bank no longer has an IPO sponsorship license in Hong Kong.
UBS was the other co-sponsor of China Forestry's deal with Standard Chartered.
Trading in China Forestry has been suspended since January 2011 and the company is now in liquidation and delisting after the company's auditor said it had found possible accounting irregularities.
Standard Chartered's management told an earnings media call the investigation involved only one IPO transaction and that discussions with the SFC were ongoing. "On Hong Kong, what we disclosed was what we know. This is a business we have exited....so the degree to which this will have an ongoing impact on our revenues is very limited from what we can see," said CEO Bill Winters.
The bank's chief financial officer Andy Halford added that the possibility of action against the bank had only recently come to its attention.
A SFC spokesman told Reuters "an investigation is under way, and we do not have any further comment to make at this stage." In October 2013 the SFC introduced a strict new regime that demanded higher standards from sponsors of IPOs and made banks liable if listing prospectuses were found to have misled investors.
The rules were introduced after the SFC found a range of deficiencies among IPO sponsors, including inadequate due diligence and questionable disclosures to the Hong Kong stock exchange during the application process.