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Hong Kong regulator probing 15 firms for IPO sponsorship roles

[HONG KONG] Hong Kong's securities regulator is probing "substandard work" by 15 firms in their roles as sponsors for initial public offerings (IPOs) in the Asian financial hub, a senior official said on Wednesday.

Thomas Atkinson, who heads enforcement at Hong Kong's Securities and Futures Commission (SFC), told the Thomson Reuters Pan-Asian Regulatory Summit that the regulator was currently investigating 136 "active fraud cases", of which 28 were "particularly serious".

The sloppy work from the 15 unnamed sponsors, as investment banks and securities firms that underwrite listings are called, caused billions of dollars in investment losses, he added.

The shortcomings included checking basic issues such as verifying customers or revenue data for listing candidates, Mr Atkinson said, adding that some of the behaviour could be considered "reckless".

"Quite a number of these serious cases involve gross overstatement of revenue and circular financing, many facilitated by related parties and false customers," Mr Atkinson said. "Of course, one of the risk management tools that's essential for preventing this kind of fraud is our IPO sponsorship regime."

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In October 2013, the SFC introduced a strict new regime to hold sponsors of IPOs to higher standards and said it would hold banks liable if listing prospectuses were found to have misled investors.

In January, the regulator filed a suit against Standard Chartered Plc, UBS Group AG and four other parties over the 2009 IPO of timber company China Forestry Holdings Co Ltd.


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