UBS has been fined HK$400m (U$51m) in Hong Kong for overcharging thousands of customers for bond trades over almost a decade in a case regulators said exposed “systemic” control failures at the Swiss bank.
The Securities and Futures Commission said on Monday that between 2008 and 2015 Hong Kong clients of UBS’s wealth management division were forced to pay more for bonds and structured debt products after the bank added a further “spread” to the trades that clients in its flagship wealth management business had requested.
The Swiss bank also took two years to report the misconduct after discovering it, the SFC said of a practice that involved almost 30,000 transactions and about 5,000 clients accounts managed in Hong Kong. UBS has also agreed to repay about HK$200m to the affected clients.
“UBS fell far short of these expectations by systematically overcharging a very large number of clients over many years,” Ashley Alder, the chief executive of the SFC, said in a statement. “Although each overcharge represented a fraction of each trade, UBS’s misconduct involved deception and a pervasive abuse of trust resulting in significant additional revenue for UBS to which it was not entitled.”
UBS’s misconduct involved deception and a pervasive abuse of trust
The penalty is the latest UBS has been hit with in Hong Kong. In March, the SFC suspended for 12 months its Hong Kong licence to advise on corporate finance in connection with its failures as a sponsor of Chinese initial public offerings in an action that also saw several other major banks fined.
A lack of supervision of staff and “failures of the first and second lines of defence functions” of UBS contributed to the conduct, the regulator said its investigation had found.
In a statement, UBS said that it self-reported the misconduct and the “behaviour of the individuals involved is unacceptable and in strong contrast to the behavioural principles of our firm.”
It added that “the relevant conduct predominantly relates to limit orders of certain debt securities and structured note transactions, which account for a very small percentage of the bank’s order processing system.”
Between 2008 and 2017, UBS also charged clients fees in excess of standard disclosures or rates, the regulator said. UBS had taken disciplinary actions against more than 20 staff, the SFC added.
In June, UBS came under fire from Chinese netizens for comments made by an economist. In the so-called “swinegate” incident, the economist was chastised in Chinese social media for using the phrase “Chinese pigs” in a research report concerning swine flu. The situation resulted in the bank being dropped by Chinese clients on some investment banking transactions.
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