SFC Fines Hang Seng Investment HK$3 Million for Regulatory Failings

Another day, another fine for an investment company in the Hong Kong jurisdiction. The Securities and Futures Commission (SFC), a local regulator, announced today that it is fining Hang Seng Investment Management Limited (HSIM) HK$3 million ($380,000) for regulatory breaches related to funds’ cash management.

The fine comes as result of an independent review agreed upon by both the SFC and HSIM. This review found that HSIM maintained a number of cash deposits that received a level of interest lower than that of the average commercial rate.

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Such a situation was problematic as it infringed upon regulations pertaining to investment funds’ cash management procedures. Firms are not allowed to deposit cash that forms a part of their assets unless interest on those deposits is paid at a level equal to, or greater than, the prevailing interest rate.

The independent reviewer that assessed HSIM found that the company did have procedures in place to check the interest rates offered by banks. Unfortunately, HSIM did not believe that its cash deposits with the Hongkong and Shanghai Banking Corporation were interest bearing.

As a result, between 2010 and 2016 those cash deposits did not receive interest that they should have. The total interest on those deposits should have been HK$875,648 ($111,568) and HSIM voluntarily paid this amount back to the affected funds.

The already harsh fine could have been worse. When making its decision, the regulator noted the level of cooperation between itself and HSIM, the firm’s engagement of an independent review, the voluntary payment it made and the fact that this was HSIM’s first offense.

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