Hall of shame

ECM bankers who fail to bring A-share IPOs across the line won’t just feel the pain in their bonus payments, but will also be named and shamed under new proposals.

The Securities Association of China, which maintains lists of bankers eligible to work as sponsors on domestic IPOs, is proposing to add a column listing how many floats each person worked on that were withdrawn or rejected.

On the face of it, that looks like a useful tool for issuers that are shopping around for banks. The list already shows how many IPOs each arranger has completed, so now there will be an additional data point for comparison. It’s like a football league table that shows the number of goals scored and conceded.

However, under the proposed system, arrangers could earn black marks through no fault of their own – for instance, if a company decides not to go ahead with its listing because the price that investors are offering is too low, because market conditions are too choppy, or because it finds an M&A opportunity. Banks that specialise in particular industries, like technology, might also be disproportionately affected by a sector-specific downturn that discourages their clients from proceeding with IPOs. And banks that do more IPOs will probably have more deals that don’t go the distance, too.

Another list proposed by the SAC would show which sponsor representatives have been penalised or sidelined for breaking the rules over the past three years. That proposal has broader support, and would go a long way to raising standards in an industry where some banks and securities firms still put little importance on due diligence.

But regulators already have the power to terminate the licences of arrangers that break the rules. Anyone who is really out of line won’t be on any SAC list because they won’t be eligible to lead any more deals.

And market forces ought to weed out arrangers who frequently try and fail to bring duff deals. Any ECM bankers who are truly awful at their jobs won’t hang onto them for long, especially in this market environment.

So while the SAC’s new listing data serves a purpose for issuers, it doesn’t show the full picture.

What it will do is motivate bankers to limit the number of black marks against their name. If there’s one thing that focuses bankers’ minds, it’s league tables.