Hong Kong regulator imposes $2.1m fine on HSBC over telephone recording failures
The fine stems from the failure of HSBC’s Private Banking Division to tape-record 5,830 client order instructions received through 59 affected telephone lines.
Hong Kong’s Securities and Futures Commission (SFC) today announced the imposition of a $2.1 million fine on The Hongkong and Shanghai Banking Corporation Limited (HSBC) for non-compliance with the telephone recording requirements under the Code of Conduct.
The action stems from HSBC’s failures to set up or enable voice recording of some of the telephone lines in its Private Banking Division between April 8, 2017 and January 31, 2018, during which 5,830 client order instructions received through 59 affected telephone lines were not tape-recorded.
The SFC has determined that HSBC has failed to implement 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 considered a variety of factors, including 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 company also agreed to engage an independent reviewer to review the effectiveness of the remedial actions undertaken in relation to the maintenance and functionality of the voice recording system used by its Private Banking Division and to submit to the SFC and the HKMA the review report to ensure its compliance with the regulatory requirements.
The regulator notes that Paragraph 3.9(b) of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission provides that, where order instructions are received from clients through the telephone, the registered person should use a telephone recording system to record the instructions and maintain telephone recordings as part of its records for at least six months.