Citigroup, Inc. (NYSE:C)
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By Julie Steinberg
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 18, 2018).
Hong Kong's securities regulator on Thursday fined an Asian unit of Citigroup Inc. 57 million Hong Kong dollars (US$7.26 million) for failures while leading an initial public offering in the city in 2009.
Hong Kong's Securities and Futures Commission said Citigroup hadn't conducted "adequate and reasonable due diligence" on some aspects of the listing of Chinese company Real Gold Mining Ltd., for which it acted as sponsor. Sponsors shepherd companies through the listing process and can be held liable for misleading statements in the IPO prospectus.
Real Gold Mining, which operates gold mines in China, raised over $130 million in its IPO in Hong Kong. It was suspended from trading on the Hong Kong stock exchange in May 2011. The company disclosed various corporate governance breaches and disclosure lapses and its auditors resigned later that year. The shares have yet to resume trading.
Citigroup conducted customer-related interviews regarding the company without independently verifying the customers' identities, the regulator said, and also failed to supervise gathering of the due diligence by junior employees.
Citigroup is among a crop of 15 financial firms the securities regulator has been investigating for shoddy IPO work, a priority undertaken by the body's enforcement chief Thomas Atkinson. More settlements are expected with other firms in coming months, according to people familiar with the discussions.
UBS Group AG said in March it was appealing a decision by the regulator to suspend it from serving as a sponsor for IPOs for 18 months. The proposed penalty also includes a fine of 119 million Hong Kong dollars.
Thursday's action by the Hong Kong regulator, meanwhile, didn't result in Citigroup's suspension from sponsoring IPOs going forward. The U.S. bank had jumped to the top of the league tables for stock underwriting and related activities in Asia excluding Japan as of the end of the first quarter.
The regulator has moved to reinforce sponsor standards as Hong Kong prepares to play host to hotly-anticipated IPOs in the second half of this year, including those of Chinese smartphone maker Xiaomi Corp., online platform Meituan-Dianping and others.
The body said the Real Gold Mining IPO is the only offering led by Citigroup over which it had concerns.
"Citi has agreed to resolve this legacy issue with the SFC relating to its work as sponsor to Real Gold Mining`s listing application in 2009," a Citigroup spokesman said. "The resolution announced by the SFC today does not involve any license suspension and does not place any constraints on Citi's business activities or on any individual in Hong Kong or elsewhere."
The spokesman added that the firm had "cooperated fully with the SFC's investigation and has already taken appropriate action to ensure that it meets its legal and regulatory obligations at all times."
Write to Julie Steinberg at email@example.com
(END) Dow Jones Newswires
May 18, 2018 02:47 ET (06:47 GMT)
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