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Hong Kong regulator fines HSBC $2½ million

Chris Hamblin, Editor, London, 14 September 2016

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The Securities and Futures Commission of Hong Kong has reprimanded and fined HSBC for regulatory breaches and internal control failings related to position limit failures.

The disciplinary action follows an SFC investigation into the holding by HSBC of open positions in Hang Seng China Enterprises Index futures and options contracts in breach of the prescribed limit on 18 occasions in the summer of 2014. HSBC is licensed to deal in securities on behalf of its clients ('type 1' business); deal in futures contracts (type 2); give advice about securities (type 4); give advice about futures (type 5); and manage assets (type 9).

HSBC also contravened the SFC’s Code of Conduct for failing to implement adequate internal controls to monitor its positions in the Hong Kong Futures Exchange’s futures and options contracts to ensure compliance with the prescribed position limit. The SFC found that:

  • HSBC failed to identify its position limit breaches promptly;
  • there was a lack of adequate knowledge within HSBC regarding the bank’s position limits and its state of compliance with the relevant regulatory requirements; and
  • HSBC lacked policies and procedures to deal with the problem.

In deciding the penalty, the SFC has given HSBC a discount for making efforts to improve its internal monitoring controls and co-operated in other ways.

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