Hong Kong probes 'substandard work' by 15 firms on IPOs
Hong Kong's Securities and Futures Commission (SFC) is investigating "substandard work" by 15 firms that acted as sponsors for IPOs in Hong Kong, said SFC's Thomas Atkinson. 136 active fraud cases are under investigation, of which 28 were "particularly serious", said Atkinson. The regulator believes that poor work by these investment banks and securities firms resulted in billions of dollars in losses. Citigroup, Standard Chartered, CCB International and UBS are among those under investigation and facing fines. This comes as the Hong Kong Monetary Authority investigates eight banks for anti-money laundering.
HONG KONG (REUTERS) - Hong Kong's securities regulator is probing "substandard work" by 15 firms in their roles as sponsors for initial public offerings (IPOs) in the Asian financial hub, a senior official said on Wednesday.

Thomas Atkinson, who heads enforcement at Hong Kong's Securities and Futures Commission (SFC), told the Thomson Reuters Pan-Asian Regulatory Summit that the regulator was currently investigating 136 "active fraud cases", of which 28 were "particularly serious".

The sloppy work from the 15 unnamed sponsors, as investment banks and securities firms that underwrite listings are called, caused billions of dollars in investment losses, he added.

The shortcomings included checking basic issues such as verifying customers or revenue data for listing candidates, Atkinson said, adding that some of the behaviour could be considered "reckless".

"Quite a number of these serious cases involve gross overstatement of revenue and circular financing, many facilitated by related parties and false customers," Atkinson said. "Of course, one of the risk management tools that's essential for preventing this kind of fraud is our IPO sponsorship regime."

In October 2013, the SFC introduced a strict new regime to hold sponsors of IPOs to higher standards and said it would hold banks liable if listing prospectuses were found to have misled investors.

In January, the regulator filed a suit against Standard Chartered, UBS Group and four other parties over the 2009 IPO of timber company China Forestry Holdings Co Ltd.