HSBC PB fined for compliance failures

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HSBC Private Bank has been reprimanded and fined for failing to record around 6000 client order phone calls in two separate incidents over a 10-month period.

The sanction arose from HSBC’s failures to set up or enable voice recording of some of the telephone lines in its private banking division (PBD) between 8 April 2017 and 31 January 2018.

During the period, 5,830 client order instructions received through 59 affected telephone lines were not tape-recorded, according to a statement from Hong Kong’s Securities and Futures Commission (SFC).

The first incident concerned the primary telephone line of a client service executive of the PBD. Its recording function wasn’t working between 13 July 2017 and 15 January 2018, and around 630 order instructions from 44 client accounts received were not recorded.

Apparently, a systems engineer turned off the recording mechanism by mistake, the regulator said.

The second incident involved 58 shared telephone lines, whose recording functions were disabled between 8 April 2017 and 31 January 2018. About 5,200 order instructions from 627 client accounts were not recorded as a result.

Miscommunication between two different engineering firms was to blame on this occasion, with a new team unaware that the previous team’s practice was to pre-set shared telephone lines with the recording function by default.

The SFC’s Code of Conduct requires that order instructions given by phone are recorded and the tapes kept for six months.

HSBC reported the failures to the Hong Kong Monetary Authority and the SFC in February 2018.

However, the SFC decided that they “were not discovered promptly…[and] HSBC’s internal policies and procedures were not adequate and effective in ensuring proper implementation, and timely detection of any failure”, according to the statement.

It is unclear whether HSBC has been told to provide the SFC with specific details of the 5,830 unrecorded client orders or whether the bank has affirmed the orders complied with legal and ethical standards.

The regulator declined to comment beyond its statement and would not express an opinion about whether it was surprising or coincidental that the two incidents were caused by two different mistakes by phone engineers.

HSBC’s self-reporting of the incidents and its subsequent cooperation with the SFC were among the reasons for the leniency of the sanction – a HK$2.1m ($270,000) fine and a reprimand.

HSBC could not be reached for comment.

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