BoCom International fined as SFC widens clampdown

Bank of Communications International (Asia) became the latest bank ensnared in a widespread clampdown on Hong Kong IPO sponsors on Wednesday, when the securities regulator slapped it with a HK$15 million ($1.93 million) fine.

The fine related to the bank’s role as a sponsor on the mooted IPO of China Huinong, a lender in Jiangsu province that focused on small and medium-sized enterprises and individual borrowers.

The Securities and Futures Commission (SFC), Hong Kong’s securities market regulator, said in a statement on Wednesday that the punishment related partly to shortcomings in due diligence on the guarantors of some of these loans.

The guarantors included China Huinong’s executive director and its chief executive officer, and Bank of Communications International Asia (BIAL) failed to do enough due diligence on the relationship between the borrowers and these guarantors, the SFC said. The regulator said these “connected guarantees” were not included in the application proof submitted to the Hong Kong stock exchange.

BIAL accepted the punishment and did not dispute the SFC’s findings, according to the regulator’s statement. The SFC also gave some encouragement to the bank, stating there was “no evidence of systemic failures in … policies, procedures and practices relating to its sponsorship work”.

The fine was the latest step in an increasing crackdown by the SFC, which kicked off with investigations into Standard Chartered and UBS for their sponsorship of China Forestry’s IPO in 2009. But Thomas Atkinson, the SFC's tough enforcement head, promised to bring more cases after the investigation became public.

China Huinong considered listing in late 2014. The company filed documentation for an IPO on November 10 of the year, with BIAL as the sole sponsor. The deal did not, however, reach the listing stage.

BIAL could not immediately be reached for comment.