Hong Kong's regulator on Monday imposed a HK$400 million (US$51.06 million) fine on UBS " the second this year " for overcharging bond trading clients for nearly a decade, with the Swiss bank agreeing to offer a compensation of HK$200 million to 5,000 customers affected by its conduct.
It is the joint-highest fine imposed by the Securities and Futures Commission, matching the penalty imposed on HSBC Private Bank (Suisse) in 2017 for misconduct related to the sale of risky Lehman Brothers-linked structured products to customers with low-risk appetite.
In March, two UBS units were ordered to pay a combined HK$375 million for failing in their duty as IPO sponsors to conduct proper due diligence on the quality of listing candidates in three initial public offerings. UBS was also banned from acting as an IPO sponsor for one year.
"The SFC expects all intermediaries to uphold high standards of integrity when managing trades for clients. UBS fell far short of these expectations by systematically overcharging a very large number of clients over many years," said Ashley Alder, chief executive of the SFC.
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"Although each overcharge represented a fraction of each trade, UBS's misconduct involved deception and a pervasive abuse of trust resulting in significant additional revenue for UBS to which it was not entitled."
The SFC has stepped up its policing efforts across the board to clean up malpractices by investment banks and companies to assist the Hong Kong Exchanges and Clearing's bid to make the city Asia's top fundraising hub.
Ashley Alder, chief executive of Securities and Futures Commission, said in a statement that UBS' misconduct involved deception and a pervasive abuse of trust. Photo: Reuters alt=Ashley Alder, chief executive of Securities and Futures Commission, said in a statement that UBS' misconduct involved deception and a pervasive abuse of trust. Photo: Reuters
Between 2008 and 2017, UBS Wealth Management's client advisers and assistants overcharged customers when trading bonds or structured notes by increasing the spread charged. In addition, the bank also charged fees higher than its disclosed rate, the SFC said.
These 5,000 Hong Kong clients were involved in 28,700 such transactions and will receive a notice about the compensation within a month.
"The SFC considers that these malpractices involved a combination of serious systemic failures for a prolonged period of time including inadequate policies, procedures and system controls, lack of staff training and supervision, and failures of the first and second lines of defence functions of UBS," the regulator said in a statement, adding that UBS had failed to "act honestly, fairly and in the best interests of its clients".
A UBS spokesman said it was the bank that reported the malpractice to the SFC.
"After a comprehensive review, UBS self-identified and reported this matter to the relevant regulators. The self-reporting included a plan to fully reimburse the affected wealth management clients ... The behaviour of the individuals involved is unacceptable and in strong contrast to the behavioural principles of our firm," a UBS spokesman said in a statement.
The SFC said UBS has appointed an independent consultant to review internal controls and improve its system.
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