Hong Kong’s Securities and Futures Commission (SFC) said on Tuesday it has taken disciplinary actions against the Asia arm of Goldman Sachs, a global investment banking, securities and investment management firm, in relation to an offer for Wing Hang Bank, in which the company acted as one of the financial advisors. The regulator has publicly censured Goldman Sachs for breaching the local Code on Takeovers and Mergers.
Wing Hang Bank said in September 2013 that some investors had approached its majority shareholders with a proposal to sale their shareholdings in the bank.
In the SFC’s words. Goldman Sachs “fell far short of the standards expected of a financial advisor”.
Goldman Sachs executed 111 trades in the securities of Wing Hang Bank during the offer period 8 November, 2013 – 6 January, 2014. However, the company had failed to publish dealing disclosures for any of the dealings and to obtain regulatory consent for 26 of the trades, as required by the Hong Kong laws. In addition, all three research reports and one research commentary it published in relation to the bank’s traded securities did not comply with the local laws for restrictions on issue and distribution. The company failed to obtain the SFC’s consent prior to publishing the research materials.
Moreover, no reports on the profit forecasts were prepared by an accountant and a financial adviser, which is in breach of the regulation.
Under the Hong Kong Code of Takeovers, Goldman Sachs and the rest of the advisors on the sale had to disclose of the dealings in the securities of Wing Hang Bank during the offer period.
The regulator said Goldman Sachs reported of the breach itself and later apologized for the breaches. The company explained its misconduct with the fact that the offer period for Wing Hang Bank had commenced without the company realizing it.
The SFC took the following measures in relation to the breaches:
(a) Wing Hang Bank was placed on the restricted trading list on 6 January 2014 restricting all trading in Wing Hang Bank’s securities until the date permitted by the Takeovers Code other than trades that fell within the EPT or EFM exemptions;
(b) all research coverage was suspended on Wing Hang Bank and relevant research was withdrawn from Goldman Sachs’ portal;
(c) each of Goldman Sachs’ active mandates with Hong Kong issuers was checked against the Offer Period Tables to confirm relevant restrictions were in place and to ensure no omissions in dealing disclosures;
(d) internal compliance reminders were issued to the Investment Banking Team’s staff reminding them about their responsibilities under the Takeovers Code and external counsel was engaged to provide refresher training to the relevant members of the Investment Banking Team; and
(e) relevant compliance policies and procedures were reviewed and enhanced, including the implementation of Control Room checks against the Offer Period Tables, checking issuer’s announcements on the Stock Exchange’s website and subscribing to the relevant alerts from the SFC, the Stock Exchange and the Takeovers Bulletin.
Goldman Sachs is headquartered in New York and has operations worldwide, including in Europe, Australia and New Zealand, Russia, and South America. The Asian branch of the group is a licensed provider of autiomated trading and asset management services, and advising on securities, corporate finance, and futures on contracts, as well as dealing in securities.
The SFC is in charge of the licensing and supervision of financial intermediaries that operate on the Hong Kong market.