HSBC Gets Fined in HK for Voice-Record Breaches
13 September 2019: The Hong Kong Securities and Futures Commission (SFC) reprimanded and fined The Hongkong and Shanghai Banking Corporation Limited (HSBC) $2.1m for non-compliance with the telephone recording requirements under the Code of Conduct this week.
The disciplinary action arose from HSBC’s failures to set up or enable voice recording of some of the telephone lines in its Private Banking Division between 8 April 2017 and 31 January 2018, during which 5,830 client order instructions received through 59 affected telephone lines were not tape-recorded.
The SFC considered that HSBC failed to put in place 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 took into account that HSBC:
- self-reported the failures to the SFC and the Hong Kong Monetary Authority (HKMA);
- took remedial actions upon discovery of the incidents;
- cooperated with the SFC in resolving the SFC’s concerns; and
- 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 case was referred to the SFC following an investigation by the HKMA as part of the joint enforcement collaboration between the SFC and the HKMA.
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.
