Hong Kong Regulator has slapped a fine of $7.3 million on Citigroup Inc (NYSE:C) for its failure in acting as a sponsor for the listing of Real Gold Mining Ltd.
According to Securities and Futures Commission (SFC), Citigroup Global Markets Asia has not conducted the due diligence on customers of Real Gold Mining Ltd.
Real Gold Mining Ltd was suspended from trading in the year 2011 owing to accounting irregularities. Citi Group has sponsored the IPO of Real Gold Mining Ltd without conducting any adequate checks.
Citigroup has to conduct thorough checks on the staff and customers of Real Gold Mining Ltd when sponsoring the listing application. But, the group has failed miserably in discharging its duties with respect to the filing. It has simply accepted the financial details provided by the company.
According to the prevailing rules, the sponsoring company is held responsible for any misleading or untrue statements crept in the offering documents of IPO.
SFC has conducted an inquiry on 15 companies in the past for failing to follow the laid guidelines in sponsoring an IPO.
SFC has banned UBS Group AG (USA) from sponsoring any IPO in Hong Kong for 1.5 years for failing to conduct a due diligence of an IPO in the year 2009.
Citi Group said it has agreed to solve all of the issues relating to the sponsorship of China based Real Gold Mining Ltd IPO listing in the year 2009. The measures initiated by SFC on Citigroup do not include any suspension of the license. SFC has not imposed any restrictions on business activities of Citigroup worldwide and in Hong Kong.
Citigroup is fully cooperating with the investigation ordered by SFC and already taken steps to comply with regulatory and legal obligations at all times. The group will incur additional expenses on legal issues and it will affect the bottom line.
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