In a statement, HSBC said that the revocation of the licences would not affect its private banking business because its private banking operations in Hong Kong were no longer carried out by the legal entity whose licences had been revoked.

Between January 2003 and December 2008 HSBC Private Bank (Suisse) sold a series of investment products linked to the fortunes of Lehman Brothers. When the US investment banking giant collapsed in 2008, derivative products linked to the bank became worthless and investors suffered losses.

These investors complained to HSBC, the SFC and the Hong Kong Monetary Authority, Hong Kong’s banking regulator, and the SFC launched an investigation.

HSBC Private Bank (Suisse) was initially fined HK$605 million by the SFC in July 2015. The bank appealed in October 2015, and a hearing before the SFC’s three person appeals tribunal was held in May and September of 2016.

Former SFC chairman Anthony Neoh SC, the lawyer representing HSBC Private Bank, argued that the financial penalty was excessive.

On Tuesday, the tribunal, chaired by Michael John Hartmann, issued its decision.

“The Tribunal has unanimously concluded that the SFC was correct in its findings that, in the periods under review, the bank fell short of the standards demanded of it in the [SFC’s] Code of Conduct and ancillary guidelines,” the three said in a written judgement.

The bank was “culpable of material systemic failings in its marketing and sale of derivative products,” they wrote.

However, the fine was reduced from HK$605 million to HK$400 million.

“HSBC Private Bank (Suisse)’s systems and controls for selling structured products fell significantly short of the standards expected of them. In combination with flawed practices and intrinsically high risk products, the bank’s failures magnified the risk and occurrence of significant losses for customers. Accordingly, we have decided very substantial sanctions are required,” said Ashley Alder, the SFC’s chief executive in a statement on Tuesday.

“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 public.”

The fine imposed on HSBC is just part of the broader fallout in Hong Kong from the collapse of Lehman Brothers. While the investors in this case were high-net-worth individuals, tens of thousands of Hong Kong savers channelled HK$20 billion into “minibonds” issued by the New York investment bank, and sold on to other banks in Hong Kong. When Lehman Brothers collapsed, the value of these investments fell to zero, sparking bitter recriminations.

The SFC’s case was founded on 83 discrete complaints, according to the court documents.

As well as the fine, HSBC Private Bank (Suisse)’s licence to advise on securities was suspended for one year beginning on Tuesday. It also had its license to deal in securities to be partially suspended for one year.

During the one year period, the bank is allowed only to handle listed securities trading for clients and to provide advice incidental to such trading.

“The suspension of PBRS [HSBC Private Bank (Suisse)] licences will not affect HSBC Private Banking’s current operations in Hong Kong,” said HSBC in a statement.

“PBRS is the legal entity which had engaged in the relevant regulated activity in the period between 2003 and 2008. HSBC’s Private Banking business in Hong Kong no longer operates under this legal entity, and currently operates under The Hongkong and Shanghai Banking Corporation, the principal operating entity of the HSBC Group in Asia Pacific.”

Last week, HSBC paid 300 million euros (US$353 million) to settle a separate long-running investigation into tax evasion by French citizens via its private bank in Switzerland.