HKEX Probes for Rule Violations by Retail IPO Investors

Brokers involved in the New Horizon Health IPO have been asked to provide information on the retail investors who were allotted stocks.

HKEX (Hong Kong Exchanges and Clearing) is reportedly investigating whether investors violated rules by lodging multiple subscription applications in the IPO of New Horizon Health, a Chinese cancer-screening biotech company.

According to Bloomberg, HKEX has asked brokers involved in the IPO to provide the names and ID numbers of the retail investors who were allotted stocks, and to confirm that they followed proper procedures in rejecting multiple or suspected multiple applications.

New Horizon more than tripled in value on its on Thursday (18 February), after raising USD 263 million. Only 2 percent of the applicants in one board lot were allotted shares. Bloomberg reports that more than 11,000 multiple applications were found and rejected in the share sale.

HKEX is said to be responding to rising complaints over multiple applications in recent popular IPOs such as Yidu Tech, Kuaishou Technology and the withdrawn Ant Group deal, each of which attracted more than a million subscribers in a city of about seven million people.

Currently, brokers submit spreadsheets of their IPO placements to HKEX’s listing division for review, but there are no controls to ensure that the data provided is not modified.

The exchange is planning to launch a new digital IPO process via a platform known as FINI, which will close a loophole that currently allows investors to register accounts with different brokers for the same IPO. FINI is expected be up and running in Q2 2022 at the earliest.

If investors are found to have violated rules by lodging multiple subscription applications for the same IPO, it is unclear what the remedy will be, as investors may have already sold their allocations.

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