Hong Kong’s Securities Watchdog Probes Firms in Nasdaq Listings
The Securities and Futures Commission (SFC) of Hong Kong has launched an investigation into several finance firms and individuals involved in listing companies on the Nasdaq exchange. The probe is focused on alleged pump-and-dump operations, where individuals may have colluded to cause wild price swings.
Background
The SFC’s investigation is not a new development, as the New York exchange raised concerns about Hong Kong-based firms earlier this year. The concerns centered around pre-IPO investor identity, relationships with the company, and share allocation. This led to a review of Hong Kong-based firms that listed on Nasdaq.
Investigation Details
The SFC has been searching the offices of about a dozen finance firms and individuals involved in the listings. The investigation is reviewing Hong Kong brokers, representatives of US underwriters, and investors who backed the Nasdaq-listed companies. The people involved in the probe are asking not to be identified due to the confidential nature of the investigation.
GEM’s Struggles
Hong Kong’s GEM market has been struggling to attract listings, with only three initial public offerings (IPOs) in 2024. Despite relaxing rules this year, the market has seen few listings. In contrast, Nasdaq has attracted 55 firms from China and Hong Kong, raising a combined $1.3 billion.
Nasdaq’s Review
As part of its review, Nasdaq officials asked about the backgrounds of selling shareholders, their ties to the company, and share allocation. Some cases required documentation to support the valuation of private shares and bank documents to prove money changed hands in the purchase.
Hong Kong’s Response
Hong Kong’s securities law enables the SFC to take action against individuals accused of committing fraud or deception regarding an overseas listing. The watchdog is working to rebuild its reputation as an international financial center after the COVID-19 pandemic and a harsh Beijing crackdown.
Conclusion
The SFC’s investigation into Nasdaq listings is a significant development in the region’s financial markets. The probe is focused on ensuring the integrity of Hong Kong’s financial markets and protecting investors. As the SFC continues to work with international counterparts, investors can be assured that the regulator will use all legal powers to tackle fraudulent schemes and bring suspected wrongdoers to justice.
Frequently Asked Questions
Q: What is the focus of the SFC’s investigation?
A: The SFC is investigating alleged pump-and-dump operations, where individuals may have colluded to cause wild price swings.
Q: How many firms are involved in the investigation?
A: About a dozen finance firms and individuals are being searched and probed by the SFC.
Q: What is the impact of the GEM market’s struggles?
A: The GEM market has seen only three IPOs in 2024, despite relaxing rules this year. Nasdaq has attracted 55 firms from China and Hong Kong, raising a combined $1.3 billion.
Q: What is the SFC’s role in the investigation?
A: The SFC is working to rebuild its reputation as an international financial center and is using its powers to tackle fraudulent schemes and bring suspected wrongdoers to justice.
