Posted inRegulation

SFC fines Schroders and State Street

Schroder Investment Management (Hong Kong) and State Street Global Advisors have been fined by Hong Kong’s Securities and Futures Commission for two separate regulatory breaches.

Having self-reported its failure to disclose all notifiable interests in Hong Kong-listed shares to the SFC, Schroder IM in Hong Kong was fined HK$1.8m ($231,913).

An investigation by the regulator found that, between August 2005 and January 2013, the company failed to disclose to the Stock Exchange of Hong Kong (SEHK) and relevant listed companies all notifiable interests in local listed shares held in client portfolios and managed by Schroders plc and some of its subsidiaries; where they did not have, or were unable to exercise, proxy voting rights.

Notification requirements

According to the SFC: A person who acquires an interest in, or ceases to be interested in, shares in the relevant share capital of a listed corporation, or where a change occurs affecting a person’s existing interest in shares in a listed corporation’s share capital in specified circumstances, comes under a duty of disclosure.

The level for notifiable interests is 5% and the specified percentage level for changes to notifiable interests is 1%.

Notification should be given to the SEHK and the listed corporation concerned within three business days after the day on which the relevant event occurs.

Failed to follow legal advice

Legal advice obtained by Schroder advised that an “interest” in shares was broadly defined and was not confined to the exercise of a voting right, however the company failed to properly follow the advice.

The disclosure failures were discovered by Schroder in November 2012 when it was preparing to implement a new global system for the monitoring and reporting of disclosable interests in shares.

In February and March 2013, the firm filed a total of 236 substantial shareholders notices to the SEHK to correct the disclosure notices filed from July 2010 to January 2013.

In deciding the penalty, the SFC took into account the duration and extent of Schroder’s disclosure failings, Schroder’s self-report to the SFC upon discovery of its disclosure failings, the company’s co-operation with the SFC’s investigation and disciplinary process.

The company also took steps to improve its global system for monitoring and disclosing shares in Hong Kong listed companies and has a clean disciplinary record.

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