HK watchdog sues StanChart, UBS
Securities body claims market misconduct by lender, financial giant in IPO deal
H o n g K o n g ’s s e c u r i t i e s regulator has filed a lawsuit against Standard Chartered, UBS Group and audit firm KPMG over an initial public offering (IPO) by China Forestry Holdings Co in 2009.
The Securities and Futures Commission (SFC) is seeking unspecified damages for minority shareholders related to alleged “marke t misconduct” by the defendants connected to China Forestr y ’s IPO prospec tus, and the company’s financial statements for 2009 and for the first half of 2010, according to documents filed with Hong Kong’s High Court on Jan 16.
Standard Chartered and UBS were joint sponsors of C hina Forestr y ’s $216 -million, first-time share sale in November 2009, while KPMG was its auditor, data compiled by Bloomberg show. The two banks had previously disclosed potential regulatory action for their work on unspecified IPOs in Hong Kong. UBS said the SFC move could result in its suspension from working on first-time share sales in the city.
The regulator has been tightening oversight of the banks that underwrite IPOs after some deals saddled investors with losses in recent years. Hong Kong was the second-big gest marke t for new listings last year with $25.2 billion of deals, trailing only the US.
UBS ranked 18th in arranging Hong Kong IPOs last year — down from 11 th in 2015. Standard Chartered shut its equity capital marke ts business in 2015 as part of a broader exit from institutional equities to cut costs.
The SFC also sued China Forestry, its former chairman Li Kwok Cheong and former chief executive officer Li Han Chun.
The regulator is seeking compensation from the defendants to “restore” independent minority shareholders who had bought China Forestry stock and held the equity at the time trading was suspended in January 2011, according to the court documents.
China Forestr y has been halted from trading since then and was in the process of delisting after financial irregularities were discovered. Liquidators were appointed for the logging company in June 2015 by a court in the Cayman Islands, where it is incorporated.
The liquidators, Borrelli Walsh, last April filed a writ of summons against Standard Chartered, UBS and other advisers on the IPO, alleging offenses, including breach of contract and misrepresentation.
In October 2013, the SFC introduced a new system under which banks that sign off on listings, known as sponsors, will be held a c c o u n t a b l e i f o ff e r d o c u - ments contain untrue statements. It has also warned that bankers on such deals can be held criminally liable.
T he Securities and Futures Commission move could result in our suspension from working on first-time share sales in the city.”