Hong Kong’s paramount securities regulator SFC fined HSBC holdings $51 million for being engaged in selling Lehman Brother related notes between 2003 and 2008.
This is the largest fine the SFC has ever imposed on a company. HSBC launched an appeal and quoted that the penalty was too expensive. But they lost their trial on tuesday. Initially they were fined HK$605 and managed to reduce their fine during the trial to HK$400. SFC has also suspended HSBC licenses to advise and deal on securities-related business for one year. According to the SFC HSBC had failed to make their clients aware of the risks related to lehman investments.
The bank’s culpability was extensive, putting many clients at unnecessary risk of loss and indeed resulting in substantial losses for many,
the SFC said. The fall of Lehman Brothers le to the global financial crisis in 2008. All derivative products issued by Lehman Brothers became worthless over night which led to bancrupcy of many other banks and private investors. The SFC’S Ceo stated yesterday:
The message should be clear: our standards are designed to protect all investors including clients of retail or private banks. When breaches of these standards occur, the SFC will take action to enforce them and strive to achieve outcomes that are in the interest of the investing public.
Revoking license has no effect
HSBC stated yesterday that the revocation of their license will not affect their private banking business because its private banking operations in Hong Kong were no longer carried out by the legal entity whose licences has been revoked.