HSBC Unit Appeals Fine by Hong Kong Regulator
May 04 2016 - 8:14AM
Dow Jones News
By Julie Steinberg
HONG KONG--A unit of HSBC Holdings PLC is appealing what would
be the largest fine ever imposed by Hong Kong's securities
regulator.
Lawyers representing HSBC Private Bank (Suisse) SA on Wednesday
began their appeal of the 605 million Hong Kong dollars (US$78
million) fine handed down in July of last year by the Securities
and Futures Commission. The regulator in a civil case has alleged
misconduct surrounding products sold to HSBC's private banking
clients between 2003 and 2008, including notes that were issued and
or guaranteed by Lehman Brothers Holdings Inc.
The details of the case haven't previously been made public.
The regulator alleged that the unit should have told clients
about the risks associated with Lehman Brothers in the summer of
2008, and also said certain private banking clients were sold
financial products that were too risky for them, a lawyer for HSBC
said on Wednesday.
In addition to the fine, the Securities and Futures Commission
has sought to revoke a license from the HSBC entity and prevent it
from advising on securities in Hong Kong.
HSBC is appealing the fine and the revocation, a spokesman said,
declining to comment further on the case. A spokesman for the
Securities and Futures Commission declined to comment on the
hearing.
Anthony Neoh, counsel for the bank and a former chairman of the
Securities and Futures Commission, said during Wednesday's hearing
that the fine "cannot be justified" and that HSBC "couldn't
forecast" Lehman's eventual bankruptcy in September 2008. Lehman
had high credit quality that didn't change very much until the firm
went bankrupt, he said.
He said the Securities and Futures Commission was "wrong" not to
take into account the "contractual relationship between bankers and
clients." The nature of a private-banking relationship is
"different," he said, than a relationship a bank has with a retail
customer. Private banks require clients to have higher minimums of
investible assets that can run into the millions of dollars.
A lawyer familiar with the proceedings said complaints from HSBC
clients over the financial products came from those with so-called
execution accounts, for which the bank handled clients' orders and
trades but didn't give investment advice or recommendations.
Private banking clients are considered knowledgeable investors
who agreed to take on risks and retain control of their
investments, the person added.
The hearing, which is being held in the city's Securities and
Futures Appeals Tribunal, is expected to continue this week and
next and possibly a few days in August.
Write to Julie Steinberg at julie.steinberg@wsj.com
(END) Dow Jones Newswires
May 04, 2016 07:59 ET (11:59 GMT)
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