The Hong Kong branch of HSBC Holdings Plc's Swiss private banking business was fined HK$400 million after losing its appeal against a 2015 ruling for misconduct in selling products linked to the now-defunct Lehman Brothers Holdings Inc.
HSBC Private Bank (Suisse) SA will have its license to give advice on securities suspended and its license to deal in securities partially suspended, each for a period of one year, the city's Securities and Futures Commission said Nov. 21. The partial suspension means the branch is only allowed to handle trading in listed securities for clients, as well as to provide advice to clients incidental to such trading.
In July 2015, the securities regulator imposed a fine of HK$605 million on the unit for allegedly failing to inform clients of the risks associated with its products, including notes issued and guaranteed by Lehman Brothers, which were sold between 2003 and 2008. The fine was then appealed by the bank in October 2015, with hearings held in May and September 2016, the South China Morning Post reported Nov. 21.
The Securities and Futures Appeals Tribunal said the unit was "culpable of material systemic failings in its marketing and sale of derivative products" at that time. The culpability was "extensive," as the move caused substantial losses for many, it added.
However, the tribunal placed the four areas of the unit's misconduct alleged by the SFC under the category of "failure to ensure suitability of product," cutting the fine to HK$400 million.
HSBC said in a statement that the suspension would not affect its private banking business because its Hong Kong operations were no longer carried out by the legal entity whose licenses had been revoked, the SCMP noted.