Hong Kong Regulator Fines UBS with HK$400 Million


Hong Kong regulator fines UBS for overcharging clients in wealth management. The Swiss bank is now to reimburse 5,000 Hong Kong-managed wealth clients.

November 11, 2019, | AtoZ MarketsThe Hong Kong Securities and Futures Commission (SFC) has reprimanded and fined Swiss bank UBS Group AG for their failings with regard to trading activities. The watchdog said this on Monday.

Hong Kong Regulator Fines UBS for overcharging rich clients

Hong Kong Regulator fined UBS HK$400 million ($51 million) for overcharging up to 5,000 clients for nearly a decade. The SFC said in a statement that an investigation found UBS had overcharged clients on ‘post-trade spread increases’ and charges in excess of standard disclosures and rates between 2008 and 2017.

In addition, the SFC said the investigation exposed ‘serious systemic internal control failures’ at the bank. UBS had failed to disclose conflicts of interests and had overcharged some clients in ‘opaque’ trades, it said.

The overcharging affected 5000 Hong Kong managed client accounts in about 28,700 transactions, it said. Nevertheless, UBS has agreed to repay the clients HK$200 million, the SFC said.

The regulator said the overcharging occurred in the bank’s wealth management division on bond and structured notes transactions. UBS was found to have increased the spread charged after the execution of a trade without the clients’ knowledge, it said.

In the statement, the SFC said UBS was also found to have falsified some account statements which were issued to financial intermediaries who were authorized to trade for the clients to “conceal the overcharges”.

UBS said the issues were ‘self-reported’ to the SFC and the results found were against the bank’s standard practice.

“The relevant conduct predominantly relates to limit orders of certain debt securities and structured note transactions, which account for a very small percentage of the bank’s order processing system,” the bank said in a statement.

SFC chief executive Ashley Alder said while each “overcharge represented a fraction of each trade” the bank’s “misconduct involved decisions and a pervasive abuse of trust resulting in significant additional revenue for UBS to which it was not entitled”.

UBS is one of the world’s largest wealth managers, investing around 2.5 trillion Swiss Francs (US 2.5 trillion) for clients.

In March, the SFC banned UBS from leading initial public offerings in Hong Kong for a year after it found the bank, and some of its rivals had failed to carry out sufficient due diligence on a number of deals.

UBS was fined HK$375 million while Morgan Stanley was fined HK$224 million, Merrill Lynch HK$128 million and Standard Chartered (StanChart) HK$59.7 million, all for failures when sponsoring, or leading, public market floats. However, UBS shares traded 1.4% lower Monday, in line with falls for the wider banking sector.

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