Hong Kong tribunal fines HSBC private bank $51 million
for Lehman-linked products
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[November 21, 2017]
HONG KONG (Reuters) - A Hong
Kong tribunal on Tuesday imposed a fine of HK$400 million ($51 million)
on the private banking unit of HSBC <HSBA.L> in a case related to the
sale of Lehman Brothers-linked structured financial products between
2003 and 2008.
The Securities and Futures Commission (SFC) had originally imposed a
penalty of HK$605 million in 2015 on the bank for its failure to meet
"principles-based regulatory standards" at that time, which was later
appealed by HSBC.
The securities regulator had started its investigation into the issue
after some HSBC private banking clients' complained of losses arising
from investments in structured financial products of Lehman Brothers,
which filed for bankruptcy in 2008.
The Hong Kong Securities and Futures Appeals Tribunal (SFAT) said that
HSBC's private banking unit was "culpable of material systemic failings
in its marketing and sale of derivative products" in that period.
The tribunal also said the HSBC private banking unit's registration for
Type 4 regulated activity, which relates to advising on securities,
would be suspended for a period of one year beginning Tuesday.
It also "partially suspended" its registration for dealing in securities
for a period of one year, according to a copy of the order seen by
HSBC said the suspension of licenses would not affect its current
private banking operations in Hong Kong, as the business no longer
operates under the sanctioned entity and the "legal transfer" to the
existing division was completed in 2013.
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HSBC headquarters is seen at the financial Central district in Hong
Kong, China September 6, 2017. REUTERS/Bobby Yip
"HSBC Private Banking has stringent processes and controls ... 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," it
On the financial penalty, the bank said the tribunal would hear submissions from
the Hong Kong securities regulator and HSBC.
SFC's Chief Executive Ashley Alder said in a statement: "The message should be
clear - our standards are designed to protect all investors including clients of
retail or private banks."
"When breaches of these standards occur, the SFC will take action to enforce
them and strive to achieve outcomes that are in the interest of the investing
($1 = 7.8125 Hong Kong dollars)
(Reporting by Sumeet Chatterjee. Editing by Jane Merriman)
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