On 14 September, the SFC handed down a HK$2.5m (approximately £243,993) fine to the Hong Kong and Shanghai Banking Corporation (HSBC) for an internal-controls failure at the company relating to position limits. According to the watchdog, HSBC breached the position limits for Hang Seng China Enterprises Index futures and options contracts by failing to put in place ‘adequate measures to ensure compliance’ with the limits.

Crackdown continues

The penalty for HSBC is the latest episode in a long-running crackdown by the SFC on internal operational and controls failures at banks. Last month, the regulator fined Morgan Stanley HK$18.5m over internal control failures relating to disclosure of short-selling orders and thorough documentation of electronic trading services. In June, the SFC publicly censured units of Bank of America Merrill Lynch for failing to disclose dealings in securities of companies involved in two transactions on which the bank provided advice during 2015, but stopped short of a financial penalty. The Asian arm of Goldman Sachs was also publicly censured by the SFC in February this year for misconduct relating to its advice to Hong Kong lender Wing Hang Bank during its buyout by Singapore’s Overseas Chinese Banking Corp.

Clients not affected

HSBC has accepted the fine from the SFC and has issued a public apology for the breaches in question, working quickly to mitigate any brand damage that could result from the high-profile penalty. ‘The Bank has cooperated fully with the SFC throughout this investigation and has taken actions to improve our internal controls regarding compliance with the prescribed position limits in Hong Kong,’ reads a statement from the company. ‘No clients were impacted by these breaches.’

Sources: Wall Street Journal; Wall Street Journal (2); Reuters