HSBC fined record US$3 million for use of 'unauthorised' agents in MPF recruitment scheme

HSBC, Hong Kong's biggest lender, has been hit with a record fine of HK$24 million (US$3 million) by the pensions regulator for offering incentives to "unauthorised intermediaries" to get corporate clients to join its Mandatory Provident Fund (MPF) scheme in 2020 and 2021.

The Mandatory Provident Fund Schemes Authority (MPFA) said it has reprimanded and disqualified the lender's former head of pensions, Alfred Yip Sze-ki, from taking a senior executive role at any MPF operator for 18 months.

"The MPFA concluded that HSBC did not comply with the conduct requirements under the Mandatory Provident Fund Schemes Ordinance," it said in a statement on Friday.

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The watchdog said the penalty showed "the need to send a strong deterrent message to the industry that such non-compliance is not acceptable."

HSBC and its subsidiary Hang Seng Bank are together the second-largest MPF provider in the city with a combined market share of 23.3 per cent, behind Manulife on 27.9 per cent, according to data from GUM, a pensions consultant.

The MPFA said it has reprimanded and disqualified the lender's former head of pensions, Alfred Yip Sze-ki, pictured, from working for any MPF operator for 18 months. Photo: K. Y. Cheng alt=The MPFA said it has reprimanded and disqualified the lender's former head of pensions, Alfred Yip Sze-ki, pictured, from working for any MPF operator for 18 months. Photo: K. Y. Cheng>

Yip was head of pensions at HSBC from 2015 until he moved to HSBC Global Asset Management as its Asia chief operating officer in November 2020. He left the bank two years later and is now "semi-retired", according to his LinkedIn page.

An investigation by the MPFA showed that from April 2020 until February 2021 HSBC had operated a referral programme in which it hired human resources agencies or recruiters by offering them fees as incentives to refer potential corporate clients to the bank's MPF scheme.

The MPFA said HSBC breached regulations as these intermediaries were not registered with the authority. The regulator had banned providers from offering incentives to intermediaries to refer clients.

The programme had brought in 2,400 members with assets worth HK$240 million to the MPF schemes run by HSBC, the MPFA statement said.

HSBC accepts the MPFA's decision and has taken steps to help prevent future breaches, a spokesman for the bank said when contacted for comment by the Post.

"Upon identifying the issues, we cooperated fully with the MPFA's investigation and promptly implemented remedial measures to strengthen our controls," he said. "We take our obligations to comply with applicable regulations very seriously and are pleased to have resolved the matter."

"It is a fundamental regulatory requirement that only registered intermediaries with requisite qualifications and training are allowed to sell and market MPF schemes," said Cynthia Hui, chief operating officer and executive director of the MPFA.

"Allowing unregistered intermediaries to do so strikes at the heart of the regulatory regime, which is not tolerated under any circumstances."

Hui said the ban on offering incentives aimed to stop MPF members from switching schemes due to encouragement from intermediaries.

"Yip failed to identify the risks of not complying with the relevant conduct requirements, including the regulation of offering incentives and the prohibition of using unregistered persons to conduct regulated activities," the regulator said.

"The MPFA considers that HSBC's failures were attributable to the neglect of Yip as a responsible offer."

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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