Hong Kong regulator sues StanChart, UBS over Chinese company’s IPO

Hong Kong's stock market regulator has filed a lawsuit against major banks Standard Chartered and UBS along with consultancy firm KPMG over a 2009 initial public offering on the city's bourse. 

On Monday, the Securities and Futures Commission sued UBS, Standard Chartered and others over their role in the 2009 IPO of China Forestry, now under liquidation. The case, involving two global finance brands, serves both as an easy win for prosecutors and a way to send a message to listing sponsors – including Chinese banks that now dominate the city’s IPO market.

UBS and Standard Chartered were co-sponsors for the IPO of China Forestry Holdings in 2009 and had previously warned over upcoming regulatory actions. KPMG was the auditor for the IPO. All three groups declined to comment on the matter.

The SFC lawsuit concerned “market misconduct” connected to the prospectus for China Forestry’s IPO and to its annual and interim results announcements in 2009 and 2010, according to a writ of summons filed in the Hong Kong High Court.

China Forestry raised $216m from its IPO, according to Dealogic. But its listing was suspended in 2011 and KPMG later resigned after discovering irregularities in the group’s accounting records. China Forestry is at present being liquidated. UBS and Standard Chartered disclosed last year they were being investigated by the SFC over their role as IPO sponsors.

In October 2013, the Hong Kong securities regulator introduced a new system under which banks that sign off on listings, known as sponsors, will be held accountable if offer documents contain untrue statements.