A private-banking arm of HSBC, based in Germany but active in Hong Kong, has been fined and had its licence suspended by Hong Kong’s Securities and Futures Commission (SFC).
HSBC Trinkaus Investment Management Limited is licensed in Hong Kong to carry on business in Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activities.
The SFC fined it HK$3 million ($386,000) and partially suspended its licence for two years, from April 30, 2011, to April 2013. It will not be allowed to deal in or advise on over-the-counter or non exchange-traded structured notes within the meaning of 'securities' under the relevant ordinance.
This investigation stems from 2008 when many banks and brokers were found to have mis-sold structured products to retail investors. The Lehman-backed Minibond was the most prominent of many such cases.
In the case of HSBC Trinkaus, the SFC says it lacked the adequate procedures to ensure its recommendations regarding equity-linked notes were suitable or reasonable; failed to ensure it did enough product due diligence on ELNs before recommending or soliciting them; and failed to properly document the investment advice given regarding such products.
The SFC says HSBC Trinkaus has no other disciplinary record and cooperated in resolving its disciplinary proceeding.
So what is HSBC Trinkaus?
“[HSBC Trinkaus] was clearly operating in Hong Kong, selling products to Hong Kong people,” says someone familiar with the case. “It’s registered here, and it’s owned by HSBC – their name is on it. I don’t know why it’s not merged with their normal securities business.”
A spokeswoman at HSBC says the business in question is a Hong Kong subsidiary of HSBC Trinkaus & Burkhardt, a private-banking business in Germany. She says it has nothing to do with HSBC's securities or banking businesses in Hong Kong or Asia-Pacific.
The HSBC Trinkaus website says it is the symbiosis of a traditional private bank with 225 years of experience, and the HSBC global network. “Close to the mobile client and global – a unique combination which makes us stand out among German banks,” says a bit of corporate bumf (translated from the German-language website).
Yet, in this case, Trinkaus was clearly not taking advantage of the HSBC network. When asked whether HSBC would either put Trinkaus' Asia activities on the HSBC network for securities advice and trading, or make clear to Trinkaus clients that they are not in fact using the HSBC network in Hong Kong, the HSBC spokeswoman declined to comment.