The “naughty corner” for miscreant banks and other wealth management institutions is getting crowded and also highlights why compliance is such a major spending and recruitment issue for firms these days. Charges of interbank rate fixing, lax anti-money laundering controls and questionable pricing policies have been levelled - and in some cases punished heavily.

HSBC

A unit of the bank was ordered to pay $2.46 billion after a US court ruled that one of the bank’s subsidiary companies along with three of its senior executives had made false statements that inflated the company’s share price. The ruling was against credit card and mortgage lender Household International, acquired by London-based HSBC in March 2003. Household - now known as HSBC Finance Corp - is believed to have made misleading statements that inflated the company’s share price. When contacted by this publication, HSBC stated that the matter had been noted in its filing for some time and that this was the next legal step in “an eleven year case.”

JP Morgan

UK and US regulators have fined JP Morgan a total of $920 million for “serious failings” relating to trades carried out by the firm’s Chief Investment Office and disclosed last year.

The bank has agreed to settle actions brought by the US Securities and Exchange Commission, who imposed a financial penalty of $200 million and required the firm to admit wrongdoing; the Office of the Comptroller of the Currency, who imposed a financial penalty of $300 million, and the Federal Reserve, who imposed a financial penalty of $200 million.  In addition, the UK Financial Conduct Authority fined the bank $220 million.

Several months earlier, the UK's Financial Conduct Authority fined JP Morgan International Bank a total of £3.08 million (around $4.6 million) for systems and controls failings at its wealth management business. The failings persisted for two years and were not corrected until the FCA brought them to the firm’s attention in the course of its thematic review into wealth management firms and the suitability of their advice. The FCA identified a number of issues with JPMIB’s processes and an inability to demonstrate client suitability from its client files.

Among the issues identified by the FCA were: client files which were not kept up to date or that did not retain important client suitability information, a computer-based record system that did not allow sufficient information to be retained, suitability reports that failed adequately to contain a statement of the client’s demands and needs, and the fact that communications to confirm client suitability profiles were not always sent to the client (as required by JPMIB’s own policy).

Aberdeen Asset Management

The Financial Conduct Authority has fined Aberdeen Asset Managers and Aberdeen Fund Management £7,192,500 ($11,200,328) for failing to protect client money.

The FCA said in a statement that the firm had failed to adequately protect client money placed in money market deposits with third party banks between September 2008 and August 2011.

Guaranty Trust Bank

The Financial Conduct Authority fined Guaranty Trust Bank £525,000 ($814,196) for failing to have sufficient anti-money laundering controls for high risk customers between May 2008 and June 2010, at the height of the financial crisis. The regulator said the failings are “particularly serious” because they affected customers based in countries associated with a higher risk of money laundering, bribery or corruption, including accounts held by politically exposed persons.

GT Bank, a subsidiary of Nigerian Guaranty Trust Bank, opened an office in London in May 2008 offering retail and wholesale banking products and services to private, corporate and institutional clients. Its controls were reviewed in 2010 when the FCA’s predecessor, the Financial Services Authority, conducted a review into banks’ management of money-laundering risks.

Sesame Bankhall

The UK’s Financial Conduct Authority fined Sesame Bankhall £6,031,200 ($9.28 million) for two sets of failings: failing to ensure that investment advice given to its customers was suitable, and failings in the systems and controls that governed the oversight of its appointed representatives. The penalty is made up of a £245,000 fine for Sesame’s advice failings in relation to keydata life settlement products, and a £5,786,200 fine for systems and controls weaknesses across its investment advice business. All of the failings relate to Sesame’s oversight of its ARs, which are individuals or firms that draw their authorisation from a principal - in this case, Sesame - with the principal ultimately accountable to the regulator for poor practice.

UBS

The Zurich-headquartered bank agreed to pay around SFr1.4 billion (around $1.53 billion) in fines and related payments to the US, Swiss and UK authorities to settle investigations that Switzerland’s largest bank manipulated interbank interest rates. The UK's Financial Services Authority said that UBS' offences were widespread and "do not make for pretty reading". The FSA said it had found at least 2,000 requests for inappropriate interest rate submissions, as well as a number of emails and other communications about the issue. As part of the proposed agreement with the US Department of Justice, UBS Securities Japan Co has agreed to enter a plea to one count of wire fraud relating to the manipulation of certain benchmark interest rates, including Yen LIBOR. Statements from other regulators were due at the time of this update going to press.

In a separate case announced a few days ago - 11 August 2013 - the bank agreed to pay SFr110.5 million ($119.9 million) to settle complaints of investors who had sued the bank in a mis-selling case of Lehman Brothers structured products. Lehman Brothers, a prominent producer of structured products, went bankrupt in September 2008. The face value of these products collapsed. "UBS is pleased to have resolved this legacy litigation matter arising out of the 2008 financial crisis. UBS agreed to the settlement to avoid the cost and uncertainty of continued litigation. The full cost of the settlement is covered by litigation provisions established by UBS in 2012 and in prior periods," UBS said.