The British Columbia Securities Commission (BCSC) on Monday announced a couple of HSBC firms are paying more than $7 million in compensation to clients after admitting that they accidentally overcharged some clients.
Mutual fund dealer HSBC Investment Funds (Canada) Inc. and portfolio manager HSBC Private Wealth Services (Canada) Inc. admitted they inadvertently charged excess fees in some client accounts. The settlement indicates that the overcharging occurred because of inadequate controls and supervisory lapses.
The firms reported the issue to the BCSC and the Mutual Fund Dealers Association of Canada (MFDA) in April 2015, and began implementing a plan to compensate clients in June 2015.
As a result, HSBC Investment Funds has paid more than $7 million in compensation to 4,651 client accounts. Additionally, HSBC Private Wealth has paid a little over $10,000 to 10 client accounts.
The firms also agreed to pay $300,000 to the BCSC, and $20,000 in costs, to settle the case.
According to the settlement, the overcharging by HSBC Investment Funds happened because it did not consistently apply its in-house policy to advise clients when their mutual fund holdings qualify for a lower priced series of the same funds.
The much less significant issue at HSBC Private Wealth involved not consistently applying the firm’s policy of excluding client controlled securities when calculating advisory fees. Again, as a result, a small number of clients paid extra fees.
The agreement with the BCSC indicates that the two firms co-operated fully with the regulator, were quick to implement a compensation plan, and that BCSC staff didn’t find any evidence of dishonest conduct by the firms.
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