Hong Kong regulator laments underperforming bank IPO sponsors

The SFC is enhancing sponsor standards as it aims to reclaim the global IPO crown.

Investment banks sponsoring IPOs in Hong Kong are still performing “below expectations,” according to a senior official of the Securities and Futures Commission (SFC), even as the SAR’s flotation pipeline is fit to burst with a volume of blockbuster share sales in the coming quarters. 

"We continue to see sponsors perform below expectations," Tom Atkinson, director of enforcement at the Securities and Futures Commission (SFC), was quoted at TODAY! Online. "We will continue to focus on this area until standards are improved."

In March, the regulator slapped UBS Group AG with a $119m penalty and banned the Swiss bank from sponsoring IPOs in Hong Kong for 18 months due to its sponsor work on unidentified share sales.

The SFC earlier fined Citigroup’s Asian unit $7.26m (HK$57m) in May for failings in its duties as the sponsor of Chinese miner Real Gold Mining Limited’s IPO application whilst China Construction Bank subsidiary CCB International Capital Limited was also slapped with a HK$24m penalty in July over lapses in its duty as sole sponsor of Fujian Dongya Aquatics Products Co., Ltd’s flotation.

An inspection of 17 IPO underwriters by the SFC in 2011 uncovered various problems in sponsor work including lax due diligence and scanty internal controls.

Hong Kong’s IPO scene is abuzz with activity after the bourse operator approved sweeping reforms that allowed firms with no track record of profitability to list and firms with dual class structures as the SAR aims to move up the global leaderboard rankings and reclaim the global IPO crown from New York.