Citigroup Is Fined for IPO Lapses -- WSJ
May 18 2018 - 03:02AM
Dow Jones News
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 julie.steinberg@wsj.com
(END) Dow Jones Newswires
May 18, 2018 02:47 ET (06:47 GMT)
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