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Citigroup Global Markets fined HK$57M for IPO sponsor failures

Hong Kong's Securities and Futures Commission fined Citigroup Global Markets Asia Ltd. HK$57 million for failing in its duties as a sponsor on an IPO, as the regulator clamps down on IPO misconduct.

The regulator said May 17 that Citi did not properly fulfill its duties as a sponsor in the listing application of Real Gold Mining Ltd. Specifically, Citi failed to conduct enough due diligence on Real Gold's customers and properly supervise its staff when carrying out sponsor work on Real Gold's listing application.

The SFC said Citi interviewed customers by telephone without independently verifying their identities and did not seek confirm with them on their transactions with Real Gold. The regulator also found that Citi did not supervise the transaction team in the manner expected of them. For instance, a sponsor principal was appointed to supervise the transaction team more than four months after Citi was mandated to act as the listing sponsor.

Citi has committed to strengthen its internal controls and systems since Real Gold's listing, the regulator said.

Hong Kong has taken a much tougher stance on IPO misconduct. Thomas Atkinson, the SFC's head of enforcement, said March 14 that some investment banks have been "extremely reckless" when helping clients prepare prospectuses and other services when serving as IPO sponsors. The regulator had fined and banned UBS Group AG temporarily from serving as a new sponsor for new listings on the city's bourse.

Citigroup Global Markets Asia's parent is Citigroup Inc.