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UBS Hong Kong sponsor ban settles misconduct case

After years of investigation, the Hong Kong SFC has come up with its verdict against UBS and three other banks for errant past IPOs. The fines are inconsequential; the disclosure of embarrassing due diligence lapses more significant.

In mid March, the statements appeared in a sequence on the Hong Kong Securities and Futures Commission’s website. “SFC reprimands and fines Merrill Lynch Far East Limited $128 million for sponsor failures.” “SFC reprimands and fines Morgan Stanley Asia Limited $224 million for sponsor failures.” Standard Chartered Securities: $59.7 million. UBS: $375 million. Not a significant sum, you think, but enough to send a message. And then you realize they’re talking in Hong Kong dollars.

They do things differently in Asia. The combined total of HK$787 million for transgressions while sponsoring Hong Kong IPOs is equivalent to about $100 million between four banks; the StanChart fine is equivalent to just $7.6 million, or about 0.001% of the bank’s assets. Even UBS’s fine, representing half the total, is equivalent to only 1% of its 2018 net profit. It’s a far cry from American fines, where they hit French banks so hard the fines become significant cross-border capital flows.

But in Asia it’s always much more about the shame than the amount, something which was also made very clear in Singapore with the fines levied on private banks over 1MDB. The numbers do not make the slightest dent in anyone’s numbers, but the embarrassment of being named and reprimanded is intense.

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