SFC fines UBS $375 million and suspends its licence for one year for sponsor failures
Regulatory Compliance enforcement action. The Securities and Futures Commission (SFC) has reprimanded and fined UBS AG and UBS Securities Hong Kong Limited (UBS Securities Hong Kong) (collectively, UBS) a sum of $375 million for failing to discharge their obligations as one of the joint sponsors of three listing applications, namely, China Forestry Holdings Company Limited (China Forestry), Tianhe Chemicals Group Limited (Tianhe), and another listing application (the Other Listing Application) (Notes 1, 2 and 3).
The SFC also partially suspended UBS Securities Hong Kong’s licence to advise on corporate finance for one year, to the extent that UBS Securities Hong Kong shall not act as a sponsor for listing application on the Stock Exchange of Hong Kong Limited (SEHK) of any securities.
The SFC has also suspended the licence of Mr Cen Tian for two years from 14 March 2019 to 13 March 2021 for failing to discharge his supervisory duties as a sponsor principal in charge of supervision of the execution of China Forestry’s listing application (Note 4). The SFC has today also taken action against other joint sponsors involved in the listing applications of China Forestry and Tianhe.
In deciding on the sanctions, the SFC took into account that:
- UBS’s sponsor failings concerned three listing applications, including China Forestry and Tianhe;
- the deficiencies identified in relation to UBS are extensive:
- UBS had failed to properly examine and verify the fundamental aspects of China Forestry’s business – namely, its forestry assets, logging activities, insurance coverage and customers; and
- UBS allowed Tianhe to control the due diligence process and failed to take appropriate steps to address the red flags raised in the customer interviews. In addition, the breaches and deficiencies identified above related to the due diligence conducted on Tianhe’s top customers, including its largest customer, during its track record period;
- Sponsors have considerable control over the listing process. When sponsors perform substandard due diligence work and companies unsuitable for listing are nevertheless listed and eventually fail, their failure may cause enormous loss to public investors and jeopardise their confidence in Hong Kong’s financial markets. As such, deterrent penalties for sponsor failures are warranted;
- UBS and Cen cooperated with the SFC in accepting the disciplinary actions and the SFC’s findings and regulatory concerns; and
- UBS agreed to engage an independent reviewer to review its policies, procedures and practices in relation to the conduct of its sponsor business.
14 March 2019
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