Hong Kong’s Securities and Futures Commission has reprimanded Société Générale and required its wealth-management business to repay customers over lapses in its internal controls.
SG was found to have failed to disclose certain fees and charges in secondary market transactions of over-the-counter bonds, options and structured notes.
SG has not admitted liability, but has agreed to reimburse affected customers the full value of this fee, with interest, for a total of $11 million.
This is the first time the SFC has punished the local branch of a private bank for such lapses. SFC officials declined to comment on whether it is investigating other such cases.
Calls to SG were not returned by press time.
The SFC’s involvement began in September 2010 when the Hong Kong Monetary Authority, following up on a complaint, referred the case to it. An SFC spokesman declined to comment further.
The actual misdeeds took place between April 2003 and January 2006, in which SG customers appear to have paid or received a different price for OTC products from the actual price transacted for them by SG, with the bank pocketing the difference and calling it a fee.
The fee was variable and, according to an SFC announcement, “in some cases excessive”. Nor did SG disclose such charges to customers, as a fee or a commission.
The SFC raised concerns that SG’s internal controls and systems in its wealth-management business failed to deliver fair treatment to customers, disclose margins or manage conflicts of interest.
SG has agreed to engage independent reviewers to assess the amount to be paid to eligible customers, and separately to review its controls, systems and procedures in Hong Kong.
SG told the SFC it changed its practices in February 2006 to address these issues. Mark Steward, executive director of enforcement at the SFC, says in a statement, “Société Générale is doing the right thing now in reimbursing its customers”.