February 27, 2019 / 11:23 AM / 4 months ago

UPDATE 1-HK regulator suspends former China brokerage exec for IPO sponsor guidelines breach

(Adds China Merchants comment in sixth paragraph)

HONG KONG, Feb 27 (Reuters) - Hong Kong’s financial watchdog has suspended the licence of a former senior banker at China Merchants Securities (CMS) for breaching its code of conduct on initial public offerings (IPOs) in the city.

The action is the latest in a series by the Securities and Futures Commission (SFC) which has been cracking down on investment banks for their work as sponsor, or lead underwriter, of IPOs in Asia’s financial hub.

The regulator fined Citigroup’s Asian business HK$57 million ($7.26 million) in May for failings in its duties as sponsor of an IPO, and China Construction Bank International Capital HK$24 million in July.

Next month, the SFC is due to face off with UBS and Standard Chartered who have appealed fines, and in the case of UBS an additional sponsorship ban, for their role in the 2009 IPO of China Forestry, a now-defunct timber merchant.

For CMS, Wu Yinong was a sponsor principal in charge of a 2009 IPO the bank sponsored, the SFC said in a statement on Wednesday.

CMS declined to comment. Reuters was not immediately able to reach Wu for comment.

The regulator did not name the IPO involved. It said the action against Wu was related to an ongoing disciplinary action against CMS and its co-sponsor for the 2009 deal.

In 2009, CMS sponsored two IPOs in Hong Kong, according to Dealogic data - the $184 million deal for sausage casing maker Shenguan Holdings and the $231 million float of China Metal Recycling (CMR), a now liquidated scrap processor.

In July 2013 CMR became the first company in Hong Kong to be wound up by the SFC, which pushed ahead with the liquidation before it had finished investigating whether the company had overstated its financial position in its IPO prospectus, in a bid to take control of CMR’s assets.

The suspension of the licence of Wu, a former “responsible officer” at CMS in Hong Kong, will be effective from Feb 25 this year and will be in force until Aug 14, 2020, the SFC said.

Wu left CMS in 2012, according to the SFC’s licence records. He then worked at China Investment Securities International until December 2018, the records showed.

The SFC probe found that Wu failed to “exercise due skill, care and diligence in handling the listing application”, ensure the maintenance of standards of conduct and adherence to proper procedures by CMS, and “diligently supervise” his subordinates and the sponsor work, the statement said.

IPOs are big business for banks in Hong Kong, which last year took the global listings crown, raising $36.3 billion for companies in the city’s best year since 2010.

Last year however, the SFC’s head of enforcement, Tom Atkinson, warned that banks were still performing below expectations as sponsors and that the regulator was planning further steps to improve standards. (Reporting by Sumeet Chatterjee, Jennifer Hughes and Julie Zhu; Editing by Muralikumar Anantharaman Alexandra Hudson)

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