HONG KONG (Reuters) - Swiss bank UBS said Hong Kong’s securities regulator is investigating its role as sponsor of certain unnamed stock market listings in the city, with the intention to start unspecified action against the bank and some of its employees.
The disclosure by UBS, released with its third-quarter financial results, made it the first major bank to say it was being probed since Hong Kong’s Securities and Futures Commission (SFC) introduced tougher rules for listing sponsors. UBS said the watchdog had informed it of its actions this month.
The SFC’s scope for action means UBS could face financial penalties, and may even be stripped of its ability to provide corporate finance advisory services in Hong Kong for a period of time.
The regulator confirmed separately an investigation was “under way into the role of UBS as a sponsor of certain IPOs” but declined to comment further.
In a media call on Friday, UBS CEO Sergio Ermotti said of the Hong Kong investigation: “We fulfilled our obligation in terms of disclosure. This, as you can see from the disclosure, is a recent development,” adding he could not comment further.
The SFC probe adds to the litany of other investigations UBS has faced in United States and Europe, including for aiding tax evasion by wealthy clients and rate rigging, for which it has paid billions of dollars in penalties. (reut.rs/2dNVzYU)
Singapore’s central bank earlier this month fined UBS S$1.3 million ($932,400) for money laundering breaches linked to Malaysian sovereign fund 1MDB.
In October 2013 the SFC introduced a strict new regime to hold sponsors of initial public offerings to higher standards and said it would hold banks liable if listing prospectuses were found to have misled investors.
UBS has worked on $26.2 billion worth of Hong Kong IPOs over the past decade, although its presence in Hong Kong - currently the world’s hottest IPO market - is not as strong as elsewhere in the region, Thomson Reuters data showed. The Swiss firm is ranked 23rd among IPO underwriters by deal value in the city so far in 2016.
The bank has worked on some high-profile listings over the years, including some that have subsequently been subject to regulatory scrutiny and actions in Hong Kong.
Among companies whose IPOs were jointly sponsored by UBS since 2009, which have subsequently been investigated by the regulators for possible accounting irregularities, were Tianhe Chemicals Group, China Metal Recycling and China Forestry, Hong Kong stock exchange data and court filings show.
China Metal Recycling was placed into liquidation by a Hong Kong court which found the company had fabricated its financials. China Forestry is in the process of liquidation and delisting.
Tianhe’s shares have been suspended since March 2015 pending a forensic investigation into potential irregularities identified by auditors, the exchange said.
It was not immediately possible to reach Tianhe for comment.
($1 = 1.3942 Singapore dollars)
Reporting by Denny Thomas and Michelle Price; Additional reporting by Sumeet Chatterjee and Elzio Barreto in Hong Kong and Joshua Franklin in ZURICH; Editing by Lisa Jucca, Kenneth Maxwell and Christian Schmollinger