Hong Kong Monetary Authority referral leads to Securities and Futures Commission reprimand and HK$66.4 million fine of Hang Seng Bank for fund sales failures and client overcharging

The Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) published a joint enforcement outcome in which the SFC reprimanded and fined Hang Seng Bank Limited (HSB) HK$66.4 million for serious regulatory failures in selling collective investment schemes (CIS) and derivative products, and for overcharging clients and making inadequate disclosure of monetary benefits over multiple periods between February 2014 and May 2023. The disciplinary action followed an HKMA referral on CIS sales issues from 1 June 2016 to 30 November 2017, including excessively frequent CIS trading with short holding periods where clients were influenced by relationship managers despite transactions being recorded as “own choice”, and deficiencies in supervision, monitoring, and audit trail. HKMA also referred findings on derivative product distribution from 17 February 2014 to 19 December 2018, where 388 clients not characterised as having derivatives knowledge purchased derivative funds in 629 transactions, including 148 transactions above clients’ risk tolerance. A joint SFC-HKMA investigation further found that HSB retained monetary benefits when it should not have, charged transaction fees beyond amounts previously communicated, and failed to adequately disclose trailer fee arrangements, resulting in at least HK$22.4 million in excess benefits or fees; HSB has compensated affected clients, refunded excess amounts, and implemented remediation and control enhancements.