HSBC Fined HK$4.2 Million by SFC for Research Report Disclosure Failures

The Securities and Futures Commission (SFC) has imposed a fine of HK$4.2 million on The Hongkong and Shanghai Banking Corporation Limited (HSBC) for failing to meet disclosure requirements in its research reports, according to a joint statement by the SFC and the Hong Kong Monetary Authority (HKMA). This penalty arises from HSBC’s inadequate disclosure of its investment banking relationships in reports on Hong Kong-listed securities over an eight-year span, from 2013 to 2021.

Investigation and Findings

The inquiry, initiated following a self-report by HSBC, was conducted collaboratively by the HKMA and the SFC. The investigation revealed that HSBC’s disclosures, or lack thereof, affected over 4,200 research reports. The discrepancies were attributed to flaws in HSBC’s data recording and mapping systems, leading to incorrect or missing information about its investment banking ties.

Regulatory Response

The SFC criticized HSBC for not exercising due skill and care and for failing to implement effective systems and controls to ensure compliance with disclosure obligations. Despite these shortcomings, the SFC acknowledged that there was no evidence of client losses due to these disclosure issues.

Mitigating Factors and Sanctions

In determining the fine, the SFC considered several factors: the absence of client losses, HSBC’s efforts to identify the root causes of the breaches, steps taken by HSBC to improve its systems, and the bank’s cooperation with the regulators during the investigation. These factors contributed to the final decision on the disciplinary action.

Regulatory Framework

Under the Securities and Futures Ordinance, HSBC is authorized to conduct various regulated activities, including dealing in securities and futures contracts, corporate finance advising, and asset management. The SFC’s Code of Conduct mandates that firms with investment banking relationships must disclose such connections in their research reports, an obligation HSBC failed to meet.

For more information, visit the Hong Kong Monetary Authority.

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