The Securities and Futures Commission is investigating 15 financial firms that sponsored initial public offerings in Hong Kong, amid concern over “substandard” work, according to head of enforcement Tom Atkinson.
Failure to verify critical information, such as checking on customers and revenue, were among the issues, Atkinson said at the Thomson Reuters Pan Asian Regulatory Summit on Wednesday. The sponsors’ actions resulted in billions of Hong Kong dollars in losses for investors, he said.
There are 106 registered firms in Hong Kong responsible for vetting and submitting IPO applications, according to the SFC. They can be held accountable for incorrect information in prospectuses and face sanctions including fines.
The probes come amid broader efforts by the SFC to clamp down on flawed public offerings. The regulator has this year blocked IPOs, questioned new issue applicants directly and warned sponsors to follow the rules. Atkinson also said his organization has succeeded in reducing wild price swings in the city’s small-cap market.
UBS Group AG, Standard Chartered Plc, and Citigroup Inc. are among firms that have been investigated in relation to new issuers. CCB International Holdings Ltd. is also being questioned for work done on a now-scrapped 2014 IPO.
Standard Chartered and UBS said in filings last year they may face regulatory actions for their work on unspecified IPOs. In June, the SFC filed a writ in the High Court against Citigroup’s Asian arm, claiming the company engaged in “market misconduct" related to the initial public offering of Real Gold Mining Ltd. in 2009. A Citigroup spokesman declined to comment.
Atkinson also said Wednesday that the SFC will soon announce a new response to cross-border issues with mainland China. The effort will address challenges faced when gathering evidence and securing suspects, he said.
Cross-border crimes are among 136 corporate fraud investigations the SFC is currently conducting, Atkinson said. In one case, the regulator recently raided multiple premises with more than 100 agents, its largest such action to date, he said. The searches were related to groups that use companies to hide market manipulation and defraud minority investors, he said.
Separately, the Hong Kong Monetary Authority is investigating eight banks for anti-money laundering, Meena Datwani, HKMA director of enforcement, said at the same forum, without providing more details.