The Hong Kong Securities and Futures Commission (SFC) has reprimanded and fined Hang Seng Bank Limited (HSB) HKD 66.4 million for serious regulatory failures in its sale of collective investment schemes (CIS) and derivative products, and for overcharging clients and inadequately disclosing monetary benefits over various periods between February 2014 and May 2023. The disciplinary action followed referrals and joint investigative work with the Hong Kong Monetary Authority (HKMA). In CIS sales (1 June 2016 to 30 November 2017), 111 client accounts executed 100 or more CIS transactions, with 46 clients found to have been influenced by relationship managers’ solicitation or recommendations despite trades being recorded as the clients’ “own choice”. Those clients were solicited into frequent transactions with short holding periods that conflicted with fund objectives and clients’ preferred horizons, generating significant transaction costs. For derivative products (17 February 2014 to 19 December 2018), 388 clients not characterised by HSB as having derivatives knowledge purchased derivative funds in 629 transactions, including 148 transactions involving products with risk levels higher than the clients’ risk tolerance. Separate findings covering various periods between November 2014 and May 2023 identified improper retention of monetary benefits, fees charged beyond amounts previously communicated, and inadequate disclosure of trailer fee arrangements, with at least HKD 22.4 million in excess benefits or fees. HSB compensated impacted clients, refunded excess monetary benefits, and implemented remediation and control enhancements; the SFC also cited HSB’s cooperation and acceptance of the findings, and noted that the bank has no previous disciplinary record.

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