Regulators in Hong Kong slapped a hefty $51.06 million fine on Swiss investment bank UBS on Monday. After it found out about the bank's practice, which it alleged has been going on for nearly a decade, UBS had agreed to offer its 5,000 affected customers a total compensation of around HK$200 million.
The first penalty that was imposed on UBS this year was back in March. The Hong Kong regulator slapped two of the company's Asian units with a combined HK$375 million penalty for its failure to conduct due diligence on its listing candidates. The penalty was related to three separate initial public offerings (IPOs), which UBS was acting as sponsor. Apart from the fine, UBS was also suspended from acting as an IPO sponsor for 12 months.
The fine imposed by the Securities and Futures Commission is currently tied as the largest penalty it has slapped on any company. The $51.06 million, or HK$400 million, penalty matches the fine it had imposed on HSBC Private Bank in 2017 for its mismanagement in the sale of its Lehman Brothers-linked products to its customers.
According to Securities and Futures Commission chief executive, Ashley Alder, UBS had failed to meet its high standard of integrity when dealing with clients. The official added that UBS' practice of systematically overcharging its clients over many years was a clear breach of trust and integrity. The bank's practice was labeled as a clear abuse of trust and an act of deception aimed at increasing its revenues.
The agency stated that its investigation revealed that UBS' practice began sometime in 2008 and ended in 2017. Within that time frame, UBS Wealth Management advisers and assistants knowingly overcharged trade customers by intentionally increasing spread charges. Additionally, the investigation revealed that UBS was charging slightly higher fees than what it had disclosed to customers.
The agency revealed that over 5,000 clients in Hong Kong, involving more than 28,700 transactions, were victims of the scheme. After it had agreed to provide customers compensation, UBS announced that affected customers should be receiving notification within the month.
A UBS spokesman also stated that the company is condemning the actions of the individuals involved. The investment bank clarified that it was the one that reported the malpractice to the Securities and Futures Commission. UBS discovered the scheme after it conducted a comprehensive review of its business, leading it to immediately report the matter to regulators.
The latest round of penalties by the agency is part of its drive to bolster its policing efforts to clean up Hong Kong's financial industry. This includes the proliferating malpractices of investment banks and institutions within the city, hampering its bid to become Asia's top IPO hub.
