The Hong Kong financial market regulator is keeping a watchful eye on Switzerland’s UBS. A further case involving questionable activities by an investment banker has now come to light.
Former UBS investment banker Calvin Choi (pictured below) seems to have a strong attachment to his family. The smart banker has organized several initial public offerings of Chinese companies and his parents repeatedly took a larger stake in those companies.
His former employer has now reported one of the cases to SFC, the local financial market supervisor, «Bloomberg» reported.
Parental Control
The Chinese company Xinte Energy in 2015 prepared the IPO with Choi. His father and mother at the time owned a stake worth $110 million, which they held through an offshore firm on the Cayman Islands. With their stake, the parents of Choi in reality controlled Xinte Energy.
The link between the banker responsible for the IPO and the owners of the company due to go public isn’t as such prohibited by the laws of Hong Kong. There seems however to be a compliance issue in as much as the other investors weren’t informed about this link.
Compliance Problem
Furthermore, Choi would have had to report the potential conflict of interest to his employer, something he omitted doing, according to the report by «Bloomberg». Choi and UBS didn’t comment.
Choi left the bank in January of 2016 and joined Hong Kong investment boutique AMTD, where he was made chairman. The boutique incidentally is being controlled by the same offshore firm that’s invested in Xinte Energy.
Further IPOs of the Same Mould
UBS understood the links only at the beginning of 2016 when it helped arrange a $500 million bond sale for AMTD. The bank contacted SFC to ensure full transparency.
Choi is said to have helped organize at least two more IPOs of companies, in which his parents were invested, after joining AMTD. SFC didn’t say whether they had launched separate investigations into those cases.
Under Regulator Supervision
UBS has been under the supervision of the regulator since last fall. SFC had threatened to impose sanctions on UBS and its staff or retract the banking license in connection with IPO practices.
In January of 2017 it was made public that SFC had investigated the role of UBS in the IPO of China Forestry Group and had ordered compensation payments.
Problems with the accounting of the firm had surfaced after the IPO. SFC reprimanded UBS, KPMG and Standard Chartered.
