HSBC fined over DIY client fee errors

In a settlement with regulators, HSBC Securities (Canada) Inc. agreed to be sanctioned for errors in the fees charged by its discount brokerage division.

The firm agreed to pay a fine of $52,500 and costs of $5,000 after it self-reported errors uncovered by its internal audit function, which resulted in certain discount brokerage clients being overcharged, and others being undercharged, due to being misclassified in its systems.

According to the settlement that has now been approved by a hearing panel of the Canadian Investment Regulatory Organization, the firm discovered discrepancies in classifying the clients that should have qualified for “Premier” status, which entitled them to avoid inactivity fees, account maintenance fees, and annual administration fees in their brokerage accounts.

At the time, the firm relied on manual updates to its recordkeeping systems, and “[a] regularly scheduled reconciliation process had not been implemented, which led to the incorrect charging of client fees,” the settlement noted.

HSBC reported the issue to regulators in March 2023 and has since repaid almost $200,000 to the investors that were improperly overcharged.

The firm didn’t seek additional fees from investors that were mistakenly undercharged, and it also implemented changes to its systems to prevent similar issues from occurring in the future, the settlement said.

In resolving the case, HSBC admitted that, between 2018 and 2022, weaknesses in its internal controls failed to ensure that client fee agreements were accurately recorded, and that clients were charged properly.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.