Hong Kong Tribunal Rejects HSBC Appeal, Upholds HK$400 Million Fine
A Hong Kong tribunal on Tuesday upheld the bulk of a fine imposed on a unit of HSBC Holdings PLC that would be the largest ever meted out by Hong Kong's securities regulator.
The city's Securities and Futures Appeals Tribunal ordered HSBC Private Bank (Suisse) SA to pay 400 million Hong Kong dollars (US$51 million) for misconduct surrounding products sold to HSBC's private banking clients between 2003 and 2008. The products included notes that were issued and/or guaranteed by Lehman Brothers Holdings Inc.
The tribunal also suspended the unit's license to advise on securities for one year and partially suspended its license to deal in securities for one year.
Hong Kong's securities regulator, the Securities and Futures Commission, had in 2015 fined the unit 605 million Hong Kong dollars. The regulator alleged in a civil case that the unit should have told clients about risks associated with Lehman Brothers in the summer of 2008, and said certain private banking clients were sold financial products that were too risky for them. HSBC last year appealed the fine and the revocation of its license.
The tribunal said Tuesday in its written decision that there had been a "failure to ensure suitability of product" for clients, and that the sale of such products had put "many clients at unnecessary risk of loss."
The fine "provides a stern warning that principles of professional conduct must be adhered to," the tribunal said.
HSBC in a statement said its private banking unit "has stringent processes and controls which are in line with the evolving regulatory landscape, and has enhanced its investment advisory model to further align investments to client needs and to deepen clients' understanding of the nature and risks of the products."
The bank said the suspension of the licenses won't affect it, as its private banking unit no longer operates under the legal entity the suspension covers.
Ashley Alder, chief executive officer of the securities regulator, said in a statement that HSBC's systems and controls "fell significantly short of the standards expected of them" and required "very substantial sanctions."
Write to Julie Steinberg at julie.steinberg@wsj.com
(END) Dow Jones Newswires
November 21, 2017 07:34 ET (12:34 GMT)