The Securities and Futures Commission (SFC) has reprimanded and fined UBS HK$400m ($51m) for overcharging its clients over a 10-year period.
The Swiss banking group has agreed to repay the clients the full value of the overcharged sum with interest and clients will receive letters within a month notifying them the details of the repayment arrangement.
The Hong Kong regulator found that, between 2008 and 2015, client advisers and their assistants in UBS’s wealth management division had overcharged customers when conducting bond and structured note trades by “increasing the spread charged after the execution of trades without clients’ knowledge”.
It also found, between 2008 and 2017, UBS had charged its clients fees in excess of its standard disclosures or rates.
Some 5,000 Hong Kong-managed client accounts were affected, involving 28,700 transactions .
Deception
Ashley Alder, SFC chief executive, said: “The SFC expects all intermediaries to uphold high standards of integrity when managing trades for clients.
“UBS fell far short of these expectations by systematically overcharging a very large number of clients over many years.
“Although each overcharge represented a fraction of each trade, UBS’s misconduct involved deception and a pervasive abuse of trust resulting in significant additional revenue for UBS to which it was not entitled.”
Failing to disclose
Following their clients’ requests to buy or sell products, the advisers and their assistants would enter the limit order price of the clients’ trades into UBS’s processing system.
The limit order price involves buying or selling a stock at a specific price or better.
In circumstances where the actual execution price achieved in the market was better than the limit order price, they would increase the spread after executing the trades in order to “retain the price improvement for UBS”.
The regulator said this was done without agreeing or disclosing information to clients and sometimes the price was misreported.
It said, on some occasions, they would falsify account statements issued to financial intermediaries, who were authorised to trade for clients, by misreporting the spread figure to hide the overcharges.
Malpractices
The SFC added that it “considers that these malpractices involved a combination of serious systemic failures for a prolonged period of time”.
These include “inadequate policies, procedures and system controls, lack of staff training and supervision, and failures of the first and second lines of defence functions of UBS”.
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