Enforcement collaboration between HKMA and SFC - SFC reprimands and fines HSBC HK$4.2 million for disclosure failures in research reports

The Securities and Futures Commission (SFC) has reprimanded and fined The Hongkong and Shanghai Banking Corporation Limited (HSBC) HK$4.2 million for breaching the disclosure requirement when publishing research reports on Hong Kong-listed securities over an eight-year period (Notes 1 to 3).

Following a self-report by HSBC, the HKMA, in collaboration with the SFC, conducted an investigation.  Both regulators found that HSBC had failed to disclose and/or made incorrect disclosures regarding its investment banking relationships with various companies covered in research reports published between 2013 and 2021.  These issues, which were caused by deficiencies in HSBC’s data recording and mapping across systems, are estimated to have affected disclosures in over 4,200 research reports on Hong Kong-listed securities. 

The SFC considers that HSBC has failed to ensure compliance with the disclosure requirement and the accuracy of disclosures in its research reports by acting with due skill and care, as well as implementing effective systems and controls. 

In deciding the disciplinary sanction, the SFC has taken into account all relevant circumstances, including:

• there have been no evidence of client losses resulting from the disclosure issues;
• HSBC has conducted reviews to identify the root causes and extent of the breaches;
• HSBC has taken steps to enhance its systems and controls to prevent future breaches; and
• HSBC’s co-operation with the HKMA and the SFC in resolving the concerns identified in the investigation.

Notes:

1. This press release is issued jointly by the SFC and the Hong Kong Monetary Authority (HKMA).
2. HSBC is registered to carry on Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities), Type 5 (advising on futures contracts), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities under the Securities and Futures Ordinance.
3. Paragraph 16.5(d) of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission provides that a firm that has an investment banking relationship with the issuer or the new listing applicant should disclose that fact in the research report.

A copy of the Statement of Disciplinary Action is available on the SFC website.