The Securities and Futures Commission (SFC), the financial regulator of Hong Kong, has reprimanded and fined HSBC $2.1m for non-compliance with the telephone recording requirements under its code of conduct.
The disciplinary action arose from HSBC's failures to set up or enable voice recording of some of the telephone lines in its private banking division between 8 April 2017 and 31 January 2018, during which 5,830 client order instructions received through 59 affected telephone lines were not tape-recorded.
The SFC considered that HSBC has failed to put in place effective internal control procedures to ensure proper implementation of the telephone recording function and timely detection of any telephone recording failures.
In deciding the sanction, the SFC took into account that HSBC self-reported the failures to the SFC and the Hong Kong Monetary Authority (HKMA) and took remedial actions upon discovery of the incidents. The bank also cooperated with the SFC in resolving the SFC's concerns and agreed to engage an independent reviewer to review the effectiveness of the remedial actions.
The SFC said: "A strong message has to be sent to the market to deter similar misconduct."
In a statement, HSBC said it has "strengthened its sales suitability framework and cooperated with the Securities and Futures Commission fully in resolving its concerns."