Hong Kong securities regulator fines Credit Suisse US$5 million over internal control failures

Hong Kong’s Securities and Futures Commission has fined Credit Suisse HK$39.3 million (US$5.03 million) for a number of regulatory breaches and internal control issues, including failure to segregate client securities from house securities, and failure to disclose certain information about contract notes to clients.

The regulator said on Thursday it had found that Credit Suisse (Hong Kong) had used client securities on 672 occasions to settle proprietary transactions, from February 2010 to May 2016, and Credit Suisse Securities (Hong Kong), another unit, had acted similarly on 171 occasions during the same period.

Proprietary transactions occur when a firm uses its own money to trade stocks or other financial instruments in its own account.

Other regulatory breaches included failures to comply with short-selling requirements that had led to 159 oversold transactions, and rule breaches about the sale of investment products, the SFC said.

Specifically, Credit Suisse AG did not ensure that six risk mismatch transactions were suitable for clients between January 2010 and January 2013, while also failing to provide and disclose certain information to clients about contract notes requirements from April 2003 and April 2017.

The fine follows an independent review in the last quarter of 2016 into Credit Suisse’s Hong Kong business activities.