Hong Kong Regulator Fines Bocom Unit for IPO Sponsorship Lapses

  • Investment-banking unit fined $1.9 million by Hong Kong’s SFC
  • BOCOM International sponsored Huinong Capital listing attempt

Hong Kong’s securities regulator fined Bank of Communications Co.’s investment-banking unit HK$15 million ($1.9 million) for failings related to its work of a Chinese company’s initial public offering in late 2014.

As sole sponsor of the listing, BOCOM International (Asia) Ltd. didn’t conduct “reasonable due diligence” before submitting China Huinong Capital Group Ltd.’s IPO application, the Securities and Futures Commission said in a statement Wednesday. The unit failed to ensure that all information provided to the regulator was accurate and not misleading, the SFC said, adding that the city’s stock exchange had yet to approve the IPO.

In sanctioning the Bocom unit, the SFC noted that the division had cooperated with the regulator in accepting the disciplinary action. There was “no evidence to suggest a systemic failure in the company’s policies, procedures and practices relating to its sponsorship work,” the SFC said.

Scrutiny of IPO sponsors has tightened in Hong Kong after a new system was introduced in 2013 that held senior banks on a deal accountable if offer documents contain untrue statements. SFC Chief Executive Officer Ashley Alder has said the regulator wants to make sure banks’ due diligence procedures are strong enough to properly vet information provided by Hong Kong listing candidates.

Firms that have drawn penalties from the SFC in recent years for IPO sponsorship failures include Sun Hung Kai International Ltd. and Quam Capital Ltd.

The regulator in January filed a lawsuit against Standard Chartered Plc, UBS Group AG and audit firm KPMG LLP over an IPO by China Forestry Holdings Co. in 2009. In that suit, the SFC is seeking damages for minority shareholders related to alleged “market misconduct” by the defendants connected to China Forestry’s IPO prospectus, and some of the company’s financial statements.

The SFC is investigating CCB International Holdings Ltd. for its role in advising a Chinese seafood supplier on now-scrapped listing plans, according to people with knowledge of the matter.

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