Hong Kong's Securities and Futures Commission, or SFC, fined Hang Seng Bank Ltd.'s investment arm HK$3 million for failure to comply with regulations on cash management involving its funds.
Hang Seng Investment Management Ltd. was discovered to have maintained substantial cash deposits in some of its funds between 2010 and 2016, but it paid interest below the prevailing commercial rate, costing investors HK$875,648 in lost interest.
The SFC said the company failed to apply existing processes to deposits placed in the funds' current accounts and that its internal controls on cash management of the funds were "inadequate."
The regulator also reprimanded the company for failing to minimize conflicting interests between the funds' investors and its connected persons. The funds' current accounts were maintained with Hongkong & Shanghai Banking Corp. Ltd., which owns a 62.14% interest in Hang Seng Bank.
This was Hang Seng Investment Management's first regulatory breach. The firm said it has enhanced its internal processes and will pay the shortfall to investors of the affected funds.
