Hang Seng Bank’s investment arm slapped with US$382,000 fine
It’s Hang Seng Investment Management’s (HSIM) first disciplining by the securities watchdog. Regulator said it failed to meet requirements on cash management of funds. Firm will also make HK$875,648 payment of resultant shortfall
Hong Kong top securities watchdog has slapped a hefty HK$3 million (US$382,200) fine on Hang Seng Bank’s investment arm for failing to meet regulatory requirements on the management of cash within its funds.
It’s Hang Seng Investment Management’s (HSIM) first regulatory breach, and follows an independent review jointly agreed by The Securities and Futures Commission (SFC) and the company.
It was discovered some of its funds maintained substantial cash deposits between 2010 and 2016, but the interest paid on some to investors was lower than the prevailing commercial rate. The amount of lost interest was about HK$875,648.
The company failed to apply existing procedures to deposits placed in the funds’ current accounts maintained with the Hongkong and Shanghai Banking Corp, the Asian arm of HSBC, said the SFC.
The company “inadvertently and mistakenly presumed” that those accounts were non-interest bearing until July 2016 when it found from the funds’ trustees that the accounts were in fact due higher rates of interest.
The SFC concluded that HSIM’s internal controls and procedures on cash management of the funds were “inadequate” and that it failed to manage and minimise the conflicting interest between the funds’ investors and its managers.
HSIM said it has now enhanced its internal controls, procedures and practices for managing cash deposits and will make a voluntary payment of that HK$875,648 shortfall to the affected funds.
The company remains committed to meeting regulatory obligations, it added, and maintaining internal policies and procedures that reflect such obligations.
Additional reporting by Enoch Yiu