Hang Seng Bank fined $66.4m for overcharging

Reuters and staff reporter

Hong Kong's securities regulator said on Monday it had fined Hang Seng Bank (0011) HK$66.4 million for overcharging its clients while selling investment products.

The Securities and Futures Commission said that between February 2014 and May 2023, the bank earned at least HK$22.4 million in excess fees and exposed some clients to "significant" losses by asking them to conduct frequent collective investment schemes transactions with short holding periods.

Clients who declared making investment decisions themselves were in fact repeatedly solicited by the bank's relationship managers to engage in frequent and excessive collective investment scheme transactions, SFC's executive director of enforcement Christopher Wilson said.

The bank also overcharged a significant number of clients across a multitude of business lines over an extended period of time, Wilson added.

"Hang Seng Bank's internal controls were deficient in that they did not adequately supervise and monitor the sale of collective investment schemes to its clients," according to the regulator.

The bank, a 63.1-percent-owned unit of HSBC (0005), also failed to disclose trailer fee arrangements to clients trading in investment funds, the SFC added.

Hang Seng Bank responded that the issues occurred in earlier years and were promptly addressed with comprehensive corrective measures. The bank also stated that it would provide support to employees to uphold professional standards.

The issues were brought to the regulator's attention by self-reports from Hang Seng Bank, as well as findings from an investigation by the Hong Kong Monetary Authority, the regulator said.

The bank has compensated impacted clients and has taken remediation steps and enhancement measures to rectify and strengthen its internal controls, according to the SFC.

Raymond Chan King-wang, executive director of HKMA's enforcement and anti-money laundering department, said: "This enforcement outcome is a result of close collaboration between the HKMA and the SFC.

"It helps to send a strong message to the industry that they should have in place adequate systems to ensure compliance with applicable regulatory standards."

The collaboration between the regulator and the HKMA exemplifies their shared commitment to maintaining the integrity of the financial markets and protecting investors' interests, Wilson added.