SFC reprimands and fines HSBC $2.5 million for regulatory breaches
The Securities and Futures Commission (SFC) has reprimanded and fined The Hongkong and Shanghai Banking Corporation Limited (HSBC) $2.5 million for regulatory breaches and internal control failings related to position limit failures.
The disciplinary action follows an SFC investigation into the holding by HSBC of open positions in Hang Seng China Enterprises Index futures and options contracts in breach of the prescribed limit on 18 occasions from 26 May to 1 August 2014.
The SFC also found HSBC in breach of the SFC’s Code of Conduct for failing to implement adequate internal controls to monitor its positions in Hong Kong Futures Exchange’s (HKFE) futures and options contracts to ensure compliance with the prescribed position limit .
Specifically, the SFC found that:
- HSBC failed to identify its position limit breaches promptly;
- there was a lack of adequate knowledge within HSBC regarding HSBC’s position limits and its state of compliance with the relevant regulatory requirements; and
- HSBC lacked policies or procedures in place for position limit monitoring of HKFE’s futures and options contracts and failed to implement any position monitoring control over these contracts.
In deciding the penalty, the SFC has taken into account that HSBC has since taken steps to improve its internal controls on monitoring of position limit and co-operated with the SFC in resolving the SFC’s concerns.