The Securities and Futures Commission imposed a fine of HK$66.4 million and issued a formal reprimand to Hang Seng Bank Limited on 27 January 2025 for serious regulatory failures that the regulator said spanned nine years and affected hundreds of clients. The violations included soliciting clients into excessively frequent fund transactions, selling derivative products to customers whose risk profiles were unsuitable for such instruments, and overcharging clients while failing to adequately disclose the monetary benefits the bank was receiving.
The SFC's enforcement action was taken in collaboration with the Hong Kong Monetary Authority, which holds primary supervisory responsibility for banks in Hong Kong. Hang Seng Bank, a subsidiary of HSBC, compensated affected clients and refunded the at least HK$22.4 million in excess benefits and fees it had received; the issues came to light through its self-reports and HKMA referrals.
THREE CATEGORIES OF MISCONDUCT
The SFC identified three categories of misconduct across different periods. From June 2016 to November 2017, Hang Seng Bank solicited clients into excessively frequent transactions in collective investment schemes.
From 17 February 2014 to 19 December 2018, 388 clients whom the bank had not characterised as having knowledge of derivatives bought derivative funds in 629 transactions, 148 of which involved products riskier than the clients' risk tolerance.
The overcharging and inadequate disclosure violations ran from November 2014 to May 2023, spanning the longest and most recent of the three misconduct periods. The excess monetary benefits received by the bank and not properly disclosed to clients totalled at least HK$22.4 million. Hang Seng Bank refunded the full amount to affected clients as part of its remediation programme, alongside the compensation paid to those who received unsuitable product recommendations.
COOPERATION
The SFC noted that the issues were first brought to its attention by Hang Seng Bank's self-reports or HKMA referrals, and that the bank had cooperated with both regulators, accepted the findings, commissioned internal and independent reviews and enhanced its internal controls.