In January 2022, Hong Kong’s financial-markets regulator fined a large Asian Bank HK$348.25m ($44.7m) for misconduct on some of the bank’s equities-trading desks between 2008 and 2018. The regulator concluded that the bank was using deceptive practices to increase its market share and business, in addition to breaking the trust of clients.
The Securities and Futures Commission fined the bank’s Asian markets unit after a decade of dishonest stock deals in Hong Kong and for allowing trading desks under its cash equities business to make misrepresentations to institutional clients. In a statement, the regulator said it would commence disciplinary proceedings against some senior managers of the institution in due course.
You can see in full the Hong Kong Securities and Futures Commission statement and findings here.
The regulator concluded that failures and misconduct were attributable to the failings of certain former members of their senior management to discharge their supervisory duties.
“The SFC considers that such pervasive dishonest behaviour would not have continued but for serious lapses and deficiencies in its internal controls, compliance function and management oversight”, stated the SFC in a statement.
Internal control failures
The SFC doesn’t mention names on the statement but explained that the bank trader used a spreadsheet that created indications of interest, based on the previous day’s most actively traded blue-chip stocks. The regulator said that the Investment Bank being charged had innumerous opportunities to identify and rectify its internal control failures; however, the misconduct was only discovered during an SFC on-site inspection in late 2018.
The misconduct during the period of more than ten years indicates serious and systemic lapses across the bank’s controls framework. The SFC concluded that the institution failed to:
- put in place any policies or controls to monitor conflicts of interest
- have adequate internal guidelines and enforce them concerning pre-trade disclosure of and obtaining client consent for facilitation trades
- implement effective compliance monitoring
- provide training to traders
- record and monitor communications
In a statement, a spokesman for the Bank in Hong Kong, said, “We have fully cooperated with the SFC’s investigation and have implemented significant remedial measures to strengthen our compliance and internal controls”.
Are your internal controls monitoring conflicts of interest and investment activities across the organization?
Regulators expect that firms large or small have a way to monitor conflicts of interest across the organization with modern and effective compliance technology. Technology such as RegTech have set a continuing expectation from regulators that there will be better surveillance and control that look across key areas: transactions, employees and third parties.
MCO invited a panel of experts from FINRA, Northern Trust Corporation, and Coalition Greenwich to talk about "Conduct, Compliance and Ethics in Capital Markets" during a webinar. If you'd like more details about what was covered during the webinar, visit our summary blog and watch the recording of the session.
MyComplianceOffice software allows firms to monitor conflicts of interest over time easily. Our clients use our integrated solution for transaction surveillance to monitor investment activities across the organization, review conflicts of interest policy conflicts procedures and how business conflicts are managed. MyComplianceOffice helps over 500 firms around the world to manage:
- Personal Account Trading
- Market Abuse
- Research Reports
- Close Personal Relationships
- Outside Business Interests
- Chinese Wall procedures
- Material Non-Public Information
- Insider List
- Gifts and Entertainment and more
Download our brochure today to learn the benefits of our software and all modules available to help you monitor conflicts of interest and conduct risk.