The Hong Kong Securities and Futures Commission (SFC) has banned Zurich-based UBS Group AG from sponsoring initial public offerings (IPOs) on the Hong Kong Stock Exchange for 18 months. The ban comes just as the Hong Kong exchange is preparing for a surge of IPOs, especially by tech companies.
The ban is related to an ongoing investigations into UBS’s role as a sponsor of IPOs on the Hong Kong exchange in 2016, the bank said in its annual report released on Friday in Europe.
"In March 2018, the SFC issued a decision notice in relation to one of the offerings under investigation," UBS stated in the report. "The notice provides for a fine of HKD 119 million (US$15.1m) and a suspension of UBS Securities Hong Kong Limited’s ability to act as a sponsor for Hong Kong listed initial public offerings for 18 months."
The bank had been warning for some time in its quarterly reports that SFC intended to take enforcement action against UBS and certain employees in relation to offerings under investigation.
UBS said it intends to appeal the decision. "We are appealing, but even without the ability to sponsor we continue to be able to underwrite IPOs in Hong Kong, which is the far larger part of our business," the bank said in a statement, according to media reports.
The ban is a financial blow to UBS at a time when the Hong Kong market is gearing up for a number of large IPOs by technology companies. In 2017, the Swiss bank ranked second in the Hong Kong IPO revenue league table.be
Chinese smartphone maker Xiaomi Inc and Alibaba’s financial services giant Ant Financial are rumored to be planning public share floats in Hong Kong, as well as Chinese wealth management platform Lufax, backed by insurance giant Ping An.
The Hong Kong Stock Exchange is in the midst of it biggest overhaul of its IPO listing rules in twenty years, including allowing dual class-listing and favorable listing terms for biotech companies. The changes are designed to make the HKEX more attractive to technology companies, and possibly help Hong Kong reclaim its leading position on the global IPO league table.
U.S.-based cancer detection start-up Grail Inc. is reportedly planning an initial public offering on the Hong Kong Stock Exchange in what could be the first test of the city’s proposed duel-class listing system for tech companies.
Ping An Healthcare And Technology Co., Ltd., which operates the popular healthcare and medical mobile app Ping An Good Doctor, has recently been cleared for a US$5 billion initial public offering in Hong Kong.