UBS is to contest the decision by Hong Kong’s securities regulator to suspend the bank from serving as a sponsor on IPOs in the city for 18 months.
Hong Kong’s Securities and Futures Commission (SFC) also fined the Swiss bank, which is a leading IPO sponsor in Hong Kong, HK$119 mn ($15.2 mn). UBS outlined the action in its recent annual report.
Asked by IR Magazine for a comment, UBS supplied this statement: ‘The [SFC] has been conducting investigations into UBS’ role as a sponsor of certain [IPOs] listed on the Hong Kong Stock Exchange. The SFC has previously indicated that it intended to take enforcement action against UBS and certain employees in relation to certain of these offerings.
‘In March 2018 the SFC issued a decision notice in relation to one of the offerings under investigation. The notice provides for a fine of HK$119 mn and a suspension of UBS Securities Hong Kong’s ability to act as a sponsor for Hong Kong listed [IPOs] for 18 months. UBS intends to appeal the decision.’
In Hong Kong, banks leading on an IPO are known as sponsors and conduct due diligence and take companies through the listing process. Although sponsor fees are normally small, it opens opportunities for banks to win the more lucrative underwriting role if they become sponsors on a deal.
The SFC’s judgment comes as the Hong Kong Stock Exchange and many investment banks are preparing for some large IPOs this year, including that of Chinese smartphone maker Xiaomi, which has a valuation of $46 bn.
The regulator says it has no further comment on UBS beyond its initial announcement.
The enforcement action is the latest in a line of crackdowns by the SFC, which last year investigated 15 IPO sponsors. Thomas Atkinson, the SFC’s executive director of enforcement, says in a statement on his unit’s priorities for 2018 that it is ‘particularly concerned about false or misleading financial statements, initial public offering fraud and other sponsor failures.’
