The Securities and Futures Commission (SFC) has reprimanded and fined The Hongkong and Shanghai Banking Corporation Limited (HSBC) HK$4.2m after it failed to comply with disclosure requirements in thousands of research reports on Hong Kong-listed securities.
The enforcement action followed a joint investigation by the SFC and the Hong Kong Monetary Authority (HKMA), launched after HSBC self-reported the issue. The probe revealed that between 2013 and 2021, HSBC either failed to disclose or made incorrect disclosures about its investment banking relationships with companies covered in its research reports.
Investigators attributed the problems to weaknesses in HSBC’s data recording and mapping processes across internal systems. These failures are thought to have impacted over 4,200 research reports during the eight-year period, raising concerns about accuracy and regulatory compliance.
The SFC said HSBC did not act with “due skill and care” to ensure its disclosures met the required standard, citing insufficient internal controls as a key factor in the breaches. However, the regulator noted several mitigating circumstances in deciding the level of the penalty.
Among these were the absence of client losses linked to the errors, HSBC’s internal reviews to determine the causes and full scope of the failings, and steps taken by the bank to strengthen its systems and prevent similar breaches in future. The regulator also highlighted HSBC’s cooperation throughout the investigation.
The SFC said, “HSBC has failed to ensure compliance with the disclosure requirement and the accuracy of disclosures in its research reports by acting with due skill and care, as well as implementing effective systems and controls.”
This case marks a significant example of regulatory collaboration between the SFC and HKMA, signalling closer scrutiny of disclosure standards in financial institutions.
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