WALL STREET INVESTMENT banks have agreed to pay US$1.4 billion in fees to settle charges that they issued overly optimistic research reports to support their investment banking business, causing shareholders to lose millions. Yet amidst all the brouhaha there, we have heard nary a peep about similar misdeeds in Hong Kong.
It could be that Hong Kong's investment bankers floated serenely above the fray, and never got their hands dirty. Maybe we did not see the sort of shenanigans here that were so common in the US - such as the analyst who, while pushing the IPO of an Internet stock to fund managers, was calling it 'a dog' in private e-mails to colleagues.
That is hard to believe. A lot of money was thrown at initial public offerings during the go-go years in 1999 and 2000. Banks issued US$8.5 billion in IPOs in 1999 and US$16.4 billion in 2000. Is it conceivable none of those offerings was fraudulently pushed on unwary investors?
What is most likely is that the conflict of interest that bedevilled Wall Street analysts has occurred in Hong Kong but, like the worst kind of sewage, has yet to float to the top.
All the signs of potential problems are there. American banks theoretically have the same compliance procedures in Asia that they do in the US, at least for shares that are sold to US investors. That means these rules are certainly not going to be any stronger - and could be a good deal worse - than the disastrous policies that were in place on Wall Street.
Industry executives say the Chinese walls separating analysts from bankers are weaker in Asia than they are in the US.
