Hong Kong’s Securities and Futures Commission (SFC) has fined Switzerland-based investment bank and financial services firm UBS HK$400m ($51.1m) for overcharging clients and related systemic internal control failures.
UBS has also agreed to repay the full value of the overcharged amount, along with interest, to the affected clients as compensation.
SFC chief executive officer Ashley Alder said: “The SFC expects all intermediaries to uphold high standards of integrity when managing trades for clients. UBS fell far short of these expectations by systematically overcharging a very large number of clients over many years.
“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 bank will pay a total amount of approximately HK$200m ($25.5m) as repayment, which will cover the overcharges made through post-trade spread increases and charges in excess of standard rates between 2008 and 2017.
UBS Wealth Management division CAs and CAAs are involved in overcharging clients
SFC said that UBS not only failed to observe the fundamental and overarching duty but also exploited the trust of unsuspecting clients by not disclosing the conflicts of interest and overcharging.
According to SFC, the overcharge practices of the bank affected approximately 5,000 Hong Kong-managed client accounts in nearly 28,700 transactions.
The investigations revealed that the UBS Wealth Management division client advisors (CAs) and client advisors’ assistants (CAAs) had overcharged clients while conducting bond and structured note trades between 2008 and 2015.
UBS CAs and CAAs have overcharged the clients by increasing the spread charged after the execution of trades without their knowledge.
In addition, the bank had also charged its clients fees more than its standard disclosures or rates between 2008 and 2017.
The SFC said that the misconduct involved a combination of serious systemic failures, including inadequate policies, procedures and system controls, lack of staff training and supervision, and failures of the first and second lines of defence functions of UBS.
