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The decision follows an investigation by the Hong Kong Monetary Authority (HKMA) into Standard CharteredÆs mutual funds distribution and dealing operation for the period between May 2001 and September 2003. [Standard Chartered self-reported the matter to the HKMA in 2004. The HKMA referred its findings to the SFC in January 2008 for further action.]
The investigation centred on concerns that Standard Chartered gave preferential treatment to one client, Stone Castle, over other clients investing in the mutual funds from two fund houses, ACM Bernstein and Scudder.
The HKMA found that Standard Chartered allowed Stone Castle to get same-day pricing for switching in and out of the relevant mutual funds. The same-day pricing arrangement was not made known nor available to other clients of Standard Chartered who received next-day pricing.
ôFair treatment to clients means not giving advantages to one client at the expense of others,ö says Mark Steward, SFC executive director of enforcement. ôThis is an important obligation under the SFCÆs Code of Conduct.ö
The SFC believes the timing advantage given to Stone Castle was open to abuse and was potentially prejudicial to Standard CharteredÆs other clients because it could have enabled Stone Castle to trade ahead of those clients at better prices.
Standard Chartered has agreed with the SFC to make payments to the eligible clients who invested in the relevant funds and did not receive the same treatment the bank gave to Stone Castle. In entering into this agreement, Standard Chartered does not accept that it has done anything wrong and is making the payments voluntarily.
ôThe bank has cooperated fully with the SFC and the HKMA and resolved this matter by way of an early consent to the SFCÆs decision. Also, the bank has since taken proactive steps to identify and implement further procedural measures to enhance its internal controls,ö says a spokesman at Standard Chartered Bank.
Under the payment scheme, about 1,260 Standard Chartered clients who invested in the relevant funds will each be eligible to receive a total payment ranging between $0.1 and $12,739 plus interest, making a total amount available under the scheme of about $320,000 plus interest.
The SFC acknowledges the valuable assistance of the HKMA which conducted the investigation into Standard CharteredÆs conduct.
In deciding on the appropriate action to take against and the resolution with Standard Chartered, the SFC took into account the mitigating factors that the bank self-reported the matter to the HKMA and cooperated fully with both the HKMA and the SFC in agreeing to make these payments to clients.
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