Standard Chartered has been fined $2.6 million by the Hong Kong securities regulator for failings in short selling, one month after the watchdog announced a probe in the country’s prime brokerage practices.
The Securities and Futures Commission (SFC) found that Standard Chartered Securities Hong Kong (SCSHK) had failed to put in place adequate system and control procedures that resulted in at least 61 instances of regulatory breaches involving short sales executed by 11 traders.
The regulator claimed the violations took place between January 2014 and August 2015.
The SFC also found that the bank had misinterpreted and breached the Securities and Futures Financial Resources (FRR) rules “by incorrectly including amounts receivable from its clearing agent.”
The penalty is similar to that of Morgan Stanley’s $2.4 million fine last year for its “internal control failures”, which included inadequate disclosure of short selling orders.
Standard Chartered’s fine follows the launch of a thematic review by the SFC into the risk management practices and conduct of prime brokers in Hong Kong.
The review will focus on the business structures of prime brokers, including front-to-back business processes and interaction between prime services and equity derivatives activities.