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Tuesday, April 07, 2020, 21:29
HSBC investment units fined US$450k for regulatory breaches
By Sophie He
Tuesday, April 07, 2020, 21:29 By Sophie He

The Securities and Futures Commission has fined HSBC Investment Funds (Hong Kong) Ltd (HIFL) and HSBC Global Asset Management (Hong Kong) Ltd (HGAML) HK$3.5 million (US$451,500) for breaches of regulatory requirements.

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The SFC said its investigation found that some of the 53 funds managed or advised by HIFL and HGAML between 2010 and 2016 maintained cash deposits with connected entities: The Hongkong and Shanghai Banking Corp Ltd and/or its affiliates 

The SFC said in a statement on Tuesday that its investigation found that some of the 53 funds managed or advised by HIFL and HGAML between 2010 and 2016 maintained cash deposits with connected entities: The Hongkong and Shanghai Banking Corp Ltd and/or its affiliates. 

The funds’ cash deposits were placed in interest-bearing accounts of the connected entities. These mostly did not receive any interest.

An independent review revealed that prior to January 2015, HIFL and HGAML had no procedures in place to ensure cash from the funds deposited with their connected entities received interest at a rate not lower than the prevailing commercial rate. 

The review also found that while HIFL and HGAML had an established process to monitor the cash balances of the funds on a daily basis, such a process was not documented in any policies and procedures. Indeed, it was performed for only 10 of the 53 funds. 

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The SFC said HIFL’s and HGAML’s internal controls and procedures for cash management of the funds at the time were inadequate. They also failed to manage and minimize the conflicting interests between their connected entities and the funds’ investors.

However, the SFC took into account the fact that HIFL and HGAML had agreed to make a voluntary payment of US$433,257 to the affected funds.

sophiehe@chinadailyhk.com


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