Global Asset Manager Hit With Large Fine

Hong Kong Securities and Futures Commission

Hong Kong Securities and Futures Commission

In the second high profile censure in as many days, State Street Global Advisors Asia has been reprimanded and financially punished by the Securities and Futures Commission in Hong Kong.

The Securities and Futures Commission (SFC) has reprimanded and punished the Boston headquartered firm with a 4 million Hong Kong dollar fine for its failure to comply with regulatory requirements in the management of a Tracker Fund of Hong Kong (Fund).

An SFC investigation found that from 1 December 2008 to 30 June 2013, the cash balances of the Fund that were deposited with State Street Bank and Trust Company’s (SSBT) demand deposit account did not earn any interest because SSBT’s deposit rates on Hong Kong dollars were zero.

SSBT was the Fund’s trustee and an affiliate of SSGA. SSGA did not check the rate of interest offered by other banks.

Inadequate Internal Procedures

According to the SFC’s investigation findings, the prevailing commercial interest rates on Hong Kong dollars (HKD) for a deposit of the same size and term as the Fund’s cash balances were above zero during the Relevant Period.

The SFC considers that SSGA had failed to ensure that interest received on the Fund’s Hong Kong dollar cash balances from its connected person was at a rate not lower than the prevailing commercial rate for a deposit of that size and term as required by the Code on Unit Trusts and Mutual Funds (UT Code).

Independent Review

The SFC also found that SSGA’s internal procedures on the management of the Fund’s cash balances were inadequate. 

The SFC further found that SSGA had wrongly represented in six interim and annual reports of the Fund that the Fund’s cash balances were placed in a non-interest bearing current account when in fact the cash was deposited with SSBT in an interest bearing account earning zero interest.

In deciding the sanctions, the SFC took into account that SSGA had fully co-operated with the SFC in resolving the SFC’s concerns and agreed to make a voluntary payment into the Fund and engaged an independent reviewer to conduct an internal controls review of the cash management policy and procedures of SFC-authorized funds managed by SSGA.


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