Hong Kong's SFC fines UBS and suspends its licence for 12 months

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Hong Kong's SFC fines UBS and suspends its licence for 12 months

The Hong Kong regulator, the Securities and Futures Commission (SFC) has reprimanded and fined UBS US$47.7m for failing to discharge its obligations as one of the joint sponsors of three listing applications in China.

UBS was one of three listing applications: China Forestry Holdings Company Limited, Tianhe Chemicals Group Limited, and another listing application. 

The regulator also partially suspended UBS Securities Hong Kong's licence to advise on corporate finance for one year, so that UBS Securities Hong Kong will 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 Cen Tian, UBS's lead banker on the project, for two years. He was approved to act as a sponsor principal and an executive officer of UBS during periods between October 2007 and May 2015. The suspension of his license is for failing to discharge his supervisory duties as a sponsor principal in charge of supervision of the execution of China Forestry's listing application, according to the SFC.

The SFC's investigations claim that UBS has failed to make reasonable due diligence enquiries in relation to a number of core aspects of China Forestry's business. 

SFC fines UBS $375 million and suspends its licence for one year for sponsor failures

14 Mar 2019

 

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.

Sponsor failings in China Forestry's listing application

The SFC's investigations revealed that UBS had failed to make reasonable due diligence enquiries in relation to a number of core aspects of China Forestry's business (Note 5).

(i)  Failure to verify the existence of China Forestry's forestry assets

According to China Forestry's 2009 prospectus, the company and its subsidiaries (China Forestry Group), a plantation forest operator whose main businesses were the management and sustainable development of forests and the harvesting and sale of logs, owned approximately 171,780 hectares of forests in Yunnan and Sichuan Provinces of Mainland China.   

UBS became a joint sponsor of China Forestry's listing application in or around May/June 2009.  However, UBS did not conduct any site inspection of China Forestry Group's forests after it became a sponsor.  Although UBS claimed that it had carried out physical inspections at a number of China Forestry Group's forests in Sichuan and Yunnan in 2008 in its then capacity as one of the joint bookrunners, it was unable to provide any inspection records or identify the precise locations of the inspections.    

Author spotlight

Christopher Copper-Ind

Christopher Copper-Ind is editor-in-chief of International Investment. Before this, he was editorial director of The Business Year, from 2014 to 2017.