Hong Kong's regulator has fined three Credit Suisse units, including its private banking arm, HKD 39.3 million ($5 million) for a number of regulatory breaches since 2003.
The breaches include over-charging commissions, the sale of risk mismatch investment products, segregation of client securities, reporting of direct business transactions, short selling, disclosure of information in contract notes, reporting of short positions and non-compliance with electronic trading requirements.
The Securities and Futures Commission (SFC) said it has fined Credit Suisse (Hong Kong) Limited HKD 18 million ($2.3 million), Credit Suisse Securities (Hong Kong) Limited HKD 9 million ($1.1 million), and Credit Suisse AG HKD 12.3 million ($1.5 million).
Credit Suisse’s private banking business, for instance, falls under Credit Suisse AG.
Of the $1.5 million, Credit Suisse AG was fined HKD 7 million ($895,230) for failings in its suitability assessment framework and HKD 5.3 million ($677,817) related to the disclosure of information in contract notes and charging of commission to clients.
The fines are the result of a joint independent review undertaken by the SFC and Credit Suisse since the last quarter of 2016.
The review found Credit Suisse AG involved in three forms of regulatory breaches, including non-compliance related to investment suitability during the sale of products, as well as exclusion of certain transactions from post-trade risk mismatch supervisory reports between 2010 and 2016.
In the case of certain structured products, like accumulators and decumulators, the bank did not introduce additional policies to prevent mis-selling.
Aside from reporting thousands of risk mismatch transactions due to lack of pre-trade and post trade controls and supervision, 123 such transactions resulted in losses to clients.
The private bank also failed to disclose certain information related to contract notes requirements for over 22,000 transactions between April 2003 and April 2017.
In addition, the review found that private banking clients were overcharged commissions for five transactions related to equities and mutual funds in the first quarter of 2017.
Credit Suisse will compensate clients with a total of HKD 7.6 million for 10 transactions that breached suitability requirements.
‘Credit Suisse has taken appropriate action to ensure that Credit Suisse’s legal and regulatory obligations are upheld at all times and to prevent repetition of these incidents,’ a spokesperson told Citywire Asia.