HSBC fined by HK regulator for futures and options-related breaches
Hong Kong’s Securities and Futures Commission has issued a fine of HKD2.5m ($322,294) to HSBC for regulatory breaches and internal control failings in 2014. It found that HSBC neglected to enforce adequate internal controls to ensure its compliance with regulations for Hong Kong Future Exchanges’ futures and options contracts. The SFC did note, however, that HSBC had since taken measures to improve the situation. The regulator has increased action against operational control failures in banks over the past 12 months.

HONG KONG (Reuters) - Hong Kong's securities regulator said on Wednesday it fined and reprimanded HSBC (>> HSBC Holdings plc) <0005.HK> for regulatory breaches and internal control failings related to its position in the futures and options contract market.

HSBC was fined HK$2.5 million ($322,294) for failing to put in place adequate internal controls to monitor its positions in Hong Kong Futures Exchange's futures and options contracts to ensure compliance with the prescribed limit, the regulator said.

The breaches happened from May 26 to Aug 1 in 2014, said the Securities and Futures Commission in an e-mailed statement.

The SFC probe found there was a "lack of adequate knowledge within HSBC" regarding the bank's position limits and its state of compliance with the relevant regulatory requirements, the statement said.

It, however, added HSBC had since taken steps to improve its internal controls on monitoring of position limits and cooperated with the Hong Kong regulator in resolving its concerns.

"HSBC apologizes for the breaches identified and reported to the Securities and Futures Commission in 2014," the bank said in a statement.

"The Bank has cooperated fully with the SFC throughout this investigation and has taken actions to improve our internal controls regarding our compliance with the prescribed position limits in Hong Kong. No clients were impacted by these breaches," it said.

SFC has been aggressively clamping down on operational and control failures in banks' trading businesses over the past year.

Last month it fined the local securities unit of Morgan Stanley (>> Morgan Stanley) HK$18.5 million for internal control failures related to disclosure of short-selling orders and comprehensive documentation of electronic trading services.

($1 = 7.7569 Hong Kong dollars)

(Reporting by Sumeet Chatterjee; Editing by Muralikumar Anantharaman)