Hong Kong's Securities and Futures Commission (SFC) slapped UBS Securities Hong Kong with a HK$1.6 million fine for regulatory breaches and internal control failings.
This action follows an SFC investigation into UBS’s holdings on behalf of one of its clients, UBS AG London, where 175,697 contracts in China Construction Bank stock options were in breach of its position limit of 150,000 contracts on October 18, 2011, according to an SFC statement.
The SFC also found that UBS didn’t implement adequate internal controls to ensure the stock option contract positions it held or controlled were in compliance with position limits.
UBS only implemented a real-time monitoring system for one trading desk, its equities volatility trading desk. It failed to extend the system to other trading desks even though it knew those desks had been trading single-stock options listed in Hong Kong since December 2010.
And as UBS did not have a real-time monitoring system in place, it failed to apply adequate procedures to guide trading staff on its other desks on how and whom to approach for monitoring and checking position limits.
In deciding the penalty, the SFC took into account UBS’s co-operation and says the Swiss bank has since strengthened its internal controls on the monitoring of position limits.