SFC fines HSBC HK$2.5 million for breaching trading rules

The bank lacked adequate internal controls to ensure it remained compliant with the regulations

PUBLISHED : Wednesday, 14 September, 2016, 6:43pm
UPDATED : Wednesday, 14 September, 2016, 10:59pm

HSBC has been fined HK$2.5 million by Hong Kong’s Securities and Futures Commission and publicly reprimanded for regulatory breaches when trading in futures and options contracts, and for failing to have sufficient internal controls in place to prevent such breaches occurring.

The SFC said that HSBC had held open positions in Hang Seng China Enterprises Index futures and options contracts in breach of the prescribed limit on 18 occasions between May 26 and August 1, 2014.

The bank was also deemed not to have abided by the SFC’s code of conduct by failing to employ adequate internal controls to ensure that it remained compliant with the regulations.

In a statement, the SFC said that in deciding the penalty it had taken into account the fact that HSBC had since taken steps to improve its internal controls on monitoring position limits and had co-operated with the regulator in resolving its concerns.

According to the SFC’s statement of disciplinary action, HSBC first notified the regulator that it was in breach of the prescribed position limits on July 31, 2014. On November 21 that year, it then told the SFC that it was aware of being in breach of the prescribed limit on 17 occasions and, on approximately May 8, 2015, the bank notified the regulator of an additional breach.

The bank admitted to the regulator that its failure to identify the breaches was due to a lack of adequate knowledge within HSBC regarding its position limits and its state of compliance with the relevant regulatory requirements.

HSBC also admitted that during the period in question, no member of staff was responsible for monitoring the net open positions of HSCEI-related products entered into by its house account, and that at the time of the incident there was no centralised intraday monitoring of HSBC’s positions in Hong Kong Futures Exchange listed products.

HSBC spokesperson Gareth Hewett said: “HSBC apologises for the breaches identified and reported to the Securities and Futures Commission in 2014. The bank has cooperated fully with the SFC throughout this investigation and has taken actions to improve our internal controls regarding our compliance with the prescribed position limits in Hong Kong. No clients were impacted by these breaches.”