Hong Kong's regulator has slapped a HK$400m ($51m) fine on UBS for overcharging thousands of global wealth management clients for nearly a decade in a case that exposed serious and systematic problems with the bank's internal controls.
The Hong Kong Securities and Futures Commission (SFC) found that UBS systematically overcharged private banking clients by manipulating the price on bond and structured product trades between 2008 to 2015, according to a statement from the regulator.
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. UBS also charged some clients too much in fees between 2008 and 2017, the authorities said.
UBS fell far short of these expectations by systematically overcharging a very large number of clients over many years"
"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."
The Swiss bank has agreed to offer a compensation of HK$200mn to customers affected by its conduct. These 5,000 Hong Kong clients were involved in 28,700 such transactions and will receive a notice about the compensation within a month.
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. The Swiss bank also took two years to report the misconduct after discovering it.
It is the joint-highest fine imposed by the Securities and Futures Commission, matching the penalty imposed on HSBC Private Bank (Suisse) in 2017 for misconduct related to the sale of risky Lehman Brothers-linked structured products to customers with low-risk appetite.
In March, the SFC suspended for 12 months UBS' Hong Kong licence to advise on corporate finance in connection with its failures as a sponsor of Chinese initial public offerings.