The Securities and Futures Commission (SFC) has fined HSBC Global Asset Management for “failure to comply with regulatory requirements in relation to cash management for SFC-authorised funds”.
A collective fine of HK$3.5m ($451,500) was levied on HSBC Investment Funds and HSBC Global Asset Management, according to a statement from the regulator.
Between 2010 and 2016, HIF and HSBC GAM managed and/or advised 53 SFC-authorised funds. The regulator found that some of the funds maintained cash deposits in “instant access cash accounts” at HSBC or its affiliates.
Although the the accounts were interest-bearing accounts, most of the deposits (held at HSBC or its affiliates) did not receive any interest during the relevant period. Thus, the firms did not provide the required interest payments on the cash holdings.
“HIF and HSBC GAM have failed to ensure that the funds’ cash deposited with their connected persons received interest”, the regulator said. Moreover, the firms failed to “minimise and manage the conflicting interests between the funds’ investors and their connected persons”.
The firms had established controls to manage cash on a day-to-day requirements basis during the relevant period, but they were revealed to be inadequate and lacked documentation, according to the SFC.
HIF and HSBC GAM agreed to make a “voluntary payment” of $433,257 to the affected funds and take action to strengthen their internal systems and controls.
The two firms also pledged to provide the SFC with a report prepared by an independent reviewer within nine months confirming that all identified concerns are properly rectified.
In September, HSBC ‘s private banking division was fined by the SFC for failing to record around 6000 client order phone calls in two separate incidents over a 10-month period.
