Compliance
Compliance Corner: Hong Kong, HSBC
A regular round-up of compliance news, such as fines, permissions, new technology solutions to make tracking risks easier, and other developments.
Hong Kong, HSBC
The Securities
and Futures Commission has reprimanded and fined HSBC
Investment Funds (Hong Kong) and HSBC Global Asset Management
(Hong Kong) Limited HK$3.5 million. The actions were taken
because the entities broke regulatory requirements concerning
cash management for SFC-authorised funds.
The SFC found that some of the 53 funds managed and/or advised by
HIFL and HGAML between 2010 and 2016 maintained cash deposits
with connected entities, namely, The Hongkong and Shanghai
Banking Corporation Limited and/or its affiliates. The
funds’ cash deposits were placed in interest-bearing accounts of
the connected entities but mostly did not receive any
interest.
An independent review revealed that prior to January 2015, HIFL
and HGAML had no procedures in place to ensure that the funds’
cash deposited with their connected entities received interest at
a rate not lower than the prevailing commercial rate. The review
also found that whilst HIFL and HGAML had an established process
to monitor the funds’ cash balances daily, such process was not
documented in any policies and procedures and was performed for
only 10 of the 53 funds, the regulator said.
The SFC said that HIFL’s and HGAML’s internal controls and
procedures on cash management of the funds at the material time
were “inadequate”. Also, they failed to manage and minimise the
conflicting interests between their connected entities and the
funds’ investors.
The regulator said it took account of how the entities agreed to
make a voluntary payment of $433,257 to the affected funds,
representing the financial impact arising from their failures;
that they engaged an independent reviewer to conduct the review
and took remedial actions to strengthen their internal systems
and controls; and undertook to provide the SFC with a report
prepared by an independent reviewer within nine months confirming
that all identified concerns had been properly rectified. They
also cooperated with the SFC in resolving its concerns and had no
previous disciplinary record with the SFC.
