Hong Kong Regulator Slaps HSBC Stock Brokerage Unit with $5 Million HKD Fine

Hong Kong’s state regulator for financial and capital markets has censured HSBC’s stock brokerage unit. The country’s main body that regulates financial services firms states that HSBC Securities Brokers (Asia) Limited (HSBC Securities), a wholly-owned subsidiary of the Hong Kong and Shanghai Banking Corporation Limited (HSBC), provided inaccurate information during a license application process and as a result was issued a $5 million fine.

Details on the SFC official notification state that the Multi-Asset broker had submitted a license application to enhance its product offering with certain terms and conditions that were agreed with the regulator at the time. During the deployment of the new service the initial terms were breached, hence the regulators censure. The license was submitted to carry on business in Type 7 (providing automated trading services) regulated activity for its provision of matching and crossing services in Hong Kong (Crossing Service) in May 2010. During the licence application process, HSBC Securities represented to the SFC that existing clients would be given the option of “opting in”, by signing “opt in letters”, if they wished to participate in the Crossing Service (the “opt in” approach).

The SFC states: “The SFC considers that HSBC Securities’ failure to ensure the accuracy of information submitted to the SFC in support of its licence application and its failure to notify the SFC about the change from “opt in” to “opt out” approach for retail clients called into question its fitness and properness as a licensed person.”

The misinformation was brought to the SFC’s attention from a media report published in July 2011, the media reported that HSBC proposed to launch the Crossing Service to its retail clients, and that an “opt out” approach would be adopted, whereby clients would effectively be assumed to consent to their trades being matched and crossed on the Crossing Service unless they took the initiative to notify HSBC otherwise.

Last year HSBC’s Hong Kong division announced that it had entered a partnership with leading FX broker, Oanda. The bank was white-labeling Oanda’s Trading Platform to offer margin FX services to its clients.