Hong Kong regulators have imposed a HK$66.4 million fine on Hang Seng Bank for misconduct related to how it sold investment products between 2014 and 2023.
Hang Seng Bank in Central. File photo: Wikimedia Commons.
The Securities and Futures Commission (SFC) on Monday “reprimanded” Hang Sang Bank for what it described as “serious regulatory failures” linked to the financial institution’s sale of collective investment schemes and derivative products.
According to the statutory body, it took disciplinary action against Hang Sang Bank following an investigation by the Hong Kong Monetary Authority (HKMA). The probe found that between June 2016 and November 2017, 111 client accounts made 100 or more transactions in collective investment schemes.
Although most trades were labelled as the clients’ “own choice,” 46 individuals had been influenced by their relationship managers, the SFC said. The clients were said to have been “solicited into conducting excessively frequent transactions with short holding periods,” which led to high transaction costs and affected their overall profit and loss.
“[T]he bank failed to keep a sufficient audit trail to ensure that transactions were genuinely initiated by clients. It also failed to put in place sufficient controls to monitor and follow up on potentially problematic transactions after they had been conducted,” a statement by the SFC read.
Hong Kong Monetary Authority. File photo: GovHK. Credit: Z7II_7000695
Hang Seng Bank was also found to have authorised purchases of derivative funds by 388 clients who might not have knowledge of the nature and risks of derivatives. More than 20 per cent of the 629 transactions made between February 2014 and December 2018 involved products that were riskier than the clients’ tolerance level, the SFC said.
A joint investigation by the SFC and the HKMA further found that the bank had overcharged its clients and did not fully disclose its commissions from fund houses to them. The misconduct between November 2014 and May 2023 led to at least HK$22.4 million in excess benefits or fees, the regulators said.
Raymond Chan, executive director of HKMA’s enforcement and anti-money laundering unit, said the watchdog hoped the fine against Hang Seng Bank would send a “strong message to the industry” that it should comply with regulatory standards.
The regulatory body added the bank had compensated affected clients and had taken remediation steps and enhancement measures to rectify and strengthen its internal controls.
