Hong Kong's Securities and Futures Commission (SFC) has reprimanded and fined BNP Paribas Wealth Management (BNPPWM) for overcharging clients on 'certain back-to-back transactions' related to various types of investment products, including structured products.
The mismanagement of payments, involving some 2,300 transactions between 2011 and 2013, was self-reported by BNPPWM in September 2013, which under the Securities and Futures Ordinance constitutes a 'failure to exercise due skill, care and diligence to ensure the monetary benefits received from client transactions were fair and reasonable', the SFC said.
BNPPWM was charging more than it had indicated in documentation provided to clients, with the error resulting in illicit gross proceeds of HK$9.5m (US$1.2m) across 2,322 client transactions for the French bank.
As a result of the shortcomings, the regulator has fined the wealth management arm of BNP Paribas in Hong Kong with a HK$4m penalty, which it deemed 'appropriate', given that the company has a clean disciplinary record, and that it self-reported the matter and cooperated with authorities.
The Hong Kong regulator also noted that the asset management firm had already repaid the overcharged amounts to current customers and is in the process of redressing former clients, under the supervision of an independent reviewer.
SFC said in its quarterly report earlier this month that it had completed 165 investigations in the April-June quarter, and that it took disciplinary action against five companies and three individuals. However, no criminal charges have been laid by the SFC in Q1, which compares with 49 for the previous quarter, while the number of compliance advice letters halved quarter-on-quarter to 87. A total of 100 individuals and companies are subject to ongoing civil proceedings, the regulator said.
The SFC also noted that the number of collective investment schemes in Hong Kong, which include mutual and pension funds, trusts, ILAS and others, grew 4.5% in Q1 from a year earlier to 2,743. Meanwhile, the variety of unlisted structured products, which include equity-linked investments and structured deposits, dropped from 11 to three. The notional amount held in structured deposits as of June 30 was HK$951m, while HK$14,270m was held in equity-linked investments.
According to the SRP Hong Kong database, BNP has issued a total of 33 products in the three-year period of 2011 - 2013. A total of 307 tranche products have been added to the HK database in 2016, including two offers from the French investment bank.
Click in the link to read the SFC statement of disciplinary action.
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