Hong Kong’s SFC Fines UBS $11.55 million for Regulatory Breaches

Hong Kong’s financial market watchdog, the Securities and Futures Commission (SFC), announced that it has reprimanded and fined UBS AG and UBS Securities Asia Limited (collectively, UBS) $9.8 million and $1.75 million respectively over various regulatory breaches.

UBS was found to fail to make proper disclosure of its financial interests in some Hong Kong listed companies covered in its research reports between May 2004 and May 2018. The failure was caused by multiple data feed logic errors in a legacy data source used by UBS for tracking its shareholding positions.

Additionally, the SFC found that UBS AG failed to:

a. obtain valid standing authorities from 91 clients who were not qualified as professional investors and issue contract notes to them between November 2012 and February 2019 in respect of 913 securities pooled lending transactions entered into with these clients;

b. record client order instructions received through 35 telephone lines between August 2017 and June 2019, involving over 2,000 transactions executed for more than 400 clients );

c. follow applicable regulatory guidelines relating to the assessment of clients’ derivatives knowledge between January 2018 and June 2020 by failing to obtain trading evidence from clients who declared that they had conducted five or more derivative trades in the three years before declaration; and

d. disclose to 15 clients the “stop loss event” feature of a structured note issued by an issuer, and assure itself that the clients understood the risks associated with that feature before selling them the note between October 2017 and February 2020.

The SFC considers that UBS failed to act with due skill and care and put in place adequate systems and controls to ensure compliance with the applicable regulatory requirements