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Deutsche Bank will not be able to sponsor initial public offerings in Hong Kong from July after the German lender was unable to replace two regulated officials in time, and achieved the company’s plans to relaunch its Asian equity business.
The mistake means that Deutsche Securities Asia’s IPO sponsor, the bank’s regional capital markets division, will expire starting next month, according to a person familiar with the matter and confirmed by the lender.
A person close to the Securities and Futures Commission, Hong Kong’s financial regulator, said the issue suggested there were “bad internal controls” at Deutsche, as the bank would have to replace the two top employees and get approval. of the SFC. It could be a slow process.
Hong Kong banks need to maintain two major IPO regulators to be authorized as sponsors.
However, the German lender plans to rebuild its capital markets division by hiring in Asia-Pacific this year. closing much of the business in 2019. Deutsche restructured its equity and IPO research unit as part of plans to reduce 18,000 jobs worldwide and drastically reduce its investment banking. The company launched almost all of its capital market equipment in Hong Kong.
Deutsche described the issuance of IPOs as a “temporary mismatch” and said it had already recruited replacements, although the bank declined to say when they would begin. The provider can still subscribe to IPOs until their sponsor license is renewed. This means you can market shares for a floating company, a less lucrative and prestigious role than a sponsor.
According to the SFC record, until June, the main leaders on Deutsche’s IPO were investment bankers Poon Tsz Yuen and Rowena Wang. Wang left the bank on June 16, while Poon should be removed from the register of major authorized in early July, according to a person familiar with the matter. Deutsche confirmed the departures.
The bank ‘s plan to rebuild its equity business has been partly motivated by a number of outdated stock exchanges and strong trading volumes in Hong Kong this year. The city has also experienced a boom in special purpose procurement companies or blank check vehicles, many of which have been targeted at companies in the region.
A senior Deutsche executive in Hong Kong expressed disbelief when asked about the licensing situation. He said it would be “crazy” for a global bank with a large legal and compliance division to let its IPO expire and not have a plan to replace the two authorized people.
City regulators require companies to designate a sponsor at least two months before they appear on the list. Deutsche last served as a sponsor of the Hong Kong IPO of Greentown Management, a $ 1.3 billion ($ 170 million) property management business.
Separately, the SFC fined Deutsche Securities Asia HK $ 2.45 million last week for “issuing incorrect statements to its major brokerage clients” and “delaying notification of its failures to the SFC.”
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