Hong Kong regulator ends UBS’s IPO sponsorship ban early

HONG KONG (Reuters) – Hong Kong’s markets watchdog has lifted UBS’s (UBSG.S) ban on leading initial public offerings (IPOs) after 10 months, down from an initial one year, after a review of the bank’s enhanced governance processes, the regulator said on Tuesday.

The Securities and Futures Commission (SFC) lifted the ban on UBS, put in place in March and set to expire after a year, with immediate effect, it said in an emailed statement. The ban kept the bank from sponsoring, or leading, IPOs in Hong Kong because of due diligence failings on three prior IPOs.

The regulator also fined it HK$375 million ($48 million) at the time.

Helping firms to list is big business in Hong Kong, which was last year’s top listing destination worldwide, according to Refinitiv data.

Equity capital markets business accounts for 34% of investment banks’ overall fees from Asia compared with 25% of the total globally, according to Reuters calculations based on Refinitiv data.

The SFC looked to crack down on banks not carrying out their duties as sponsors, after a string of scandals at newly listed companies, levying fines on several banks also including Morgan Stanley (MS.N) and Standard Chartered (STAN.L).

Sponsors must conduct due diligence to assess the company being listed, and are responsible for assuring potential investors that its IPO prospectus is accurate.

UBS’s fine and ban was due to failings in the IPOs for China Forestry, Tianhe Chemicals, and China Metal Recycling.

Among the failings described by the regulator was one instance where UBS and its two co-sponsors in manufacturer Tianhe Chemicals’ (1619.HK) 2013 IPO failed to follow up after interviewing the company’s largest customer as part of their sponsor due diligence.

The meeting was arranged by Tianhe at its offices and the customer, named only as X, refused to give a business card or provide other identification to the banks’ representatives before abruptly leaving the meeting.

The SFC said the review had found that UBS’s governance and control processes were generally well-designed.

The external reviewer also looked at UBS’s sponsor work in its two most recent listing applications, which were completed prior to the ban, and found that the bank had performed adequate and effective due diligence.

A UBS spokesman contacted by Reuters declined to comment.

Source: Reuters

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