The Hong Kong Securities and Futures Commission (SFC) has fined UBS AG and UBS Securities Asia HK$9.8m ($1.26m) and HK$1.75m respectively for failing to disclose financial interests in some Hong Kong-listed companies covered in research reports between 2004 and 2018.
The bank’s errors were caused by multiple data feed logic errors in a legacy data source used by UBS for tracking its shareholding positions, according to a statement from the SFC.
UBS reported the issue to the Hong Kong Monetary Authority, which then alerted the SFC, the regulator said.
The Swiss bank also failed to “disclose to 15 clients the ‘stop loss event’ feature of a structured note…and assure itself that the clients understood the risks associated with that feature before selling it between October 2017 and February 2020”, said SFC. The bank has offered to compensate the clients affected.
In addition, the bank failed to record order instructions received through 35 telephone lines between August 2017 and June 2019, involving over 2000 transactions with more than 400 clients.
UBS was also fined for not obtaining authorisations from 91 clients who were not qualified as professional investors regarding 913 securities pooled lending transactions, and not acquiring previous trading evidence from clients participating in derivatives deals to assess their knowledge.
The SFC’s code of conduct requires intermediaries to assess clients on prior trading experience, that is showing proof that they had conducted five or more derivative trades in the past three years.
“The SFC considers that the bank failed to act with due skill and care and put in place adequate systems and controls to ensure compliance with the applicable regulatory requirements,” said the watchdog.
UBS has taken remedial actions to strengthen its internal controls and systems upon identifying the breaches, and cooperated with the SFC in resolving the issues, said the SFC.
The Swiss bank was also reprimanded and fined HK$375m by the SFC in 2019 “for failing to discharge their obligations as one of the joint sponsors of three listing applications” which were China Forestry, Tianhe Chemicals and a third undisclosed company.
