Hong Kong has Goldman Sachs to thank for record fines in 2020 for misconduct as regulator tightens scrutiny of market practices

The SFC collected more than twice the amount in 2019, and 32 per cent more than the combined sum from preceding five years

Goldman Sachs was docked HK$2.71 billion in October for lapses associated with its role in the misappropriation of funds at Malaysian sovereign fund

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View of HKEX at Exchange Square, Central in April 2020. The SFC is keen to clean up the market to attract new listings on the local exchange. Photo: Nora Tam

Published: 8:30am, 2 Mar 2021Updated: 8:30am, 2 Mar 2021

Hong Kong imposed record-high monetary penalties in its capital markets last year as authorities stepped up vigilance and enforcement to clamp down on market misconduct.

The Securities and Futures Commission slapped HK$2.8 billion (US$361 million) of fines on industry participants, 117 per cent more than in 2019, according to data compiled by law firm Freshfields Bruckhaus Deringer. The amount was also 32 per cent higher than the sum collected from 2015 to 2019.

The bulk of the sum, or HK$2.71 billion, was extracted from Goldman Sachs (Asia) when it reprimanded the US investment bank’s unit for “serious lapses and deficiencies” that contributed to the misappropriation of funds at the Malaysian sovereign investment fund known as 1Malaysia Development Bhd.

“Given the SFC’s focus on ‘high-impact cases’, we can expect to see the SFC continue its pursuit of large fines,” said Tim Mak, a partner of Freshfields, which began compiling the statistics in 2014. Mak said civil fines from disciplinary actions tend to be easier to obtain because of the lower threshold of proof than in criminal cases.

A Goldman Sachs sign is displayed inside the company's post on the floor of the New York Stock Exchange (NYSE) on April 18, 2017. Photo: Reuters

Goldman has paid more than US$5 billion in penalties in Hong Kong, Singapore, Malaysia, the UK and the US for its role in helping 1MDB raise US$6.5 billion in three bond offerings in 2012 and 2013. Much of the money was siphoned off by people associated with disgraced former premier Najib Razak and funnelled to pay for a Manhattan apartment, Monet art, a superyacht and even a Hollywood movie.

In 2019, the SFC imposed HK$814 million of fines on five investment banks – UBS, Morgan Stanley, Merrill Lynch, Standard Chartered Bank and China Merchants Securities (HK) – for shortcomings as sponsors for several initial public offerings (IPOs) over the past decade.