Lead Securities Regulator
British Columbia Securities Commission (BCSC)
BCSC consulted with CSA members on details of the case.
Type of Misconduct Committed
Failure by a registrant to deal fairly with clients.
HSBC Global Asset Management (Canada) (GAM Canada), a subsidiary of the HSBC Group and a registered portfolio manager, investment fund manager and exempt market dealer, managed 25 HSBC-branded, prospectus-based mutual funds, 14 of which were described in a prospectus as being suitable for investors with long-term investment time horizons. HSBC Investment Funds (Canada) Inc. was the principal distributor of the funds, but independent third-party dealers also distributed the funds.
HSBC GAM Canada terminated its agreements with 51 of these independent dealers, having decided that they no longer aligned with its overall strategic focus. As a result, HSBC GAM Canada required investors who had bought units from these dealers to redeem them – a total of $21.9 million in 1,042 accounts, held by clients across Canada. The proceeds from the redemptions were deposited into investors’ accounts. The BCSC discovered the redemptions during a routine compliance review of HSBC GAM Canada.
Requiring clients to redeem their units early was unfair to them, because they were initially told that the funds were suitable for long-term investment time horizons. The redemptions may have also led to investment losses and tax consequences, lost investment opportunities, and potential re-acquisition costs to replace investments.
Terms of settlement
Payment of $1,050,000, of which $700,000 was set aside to compensate investors.
Key Takeaways for Investors
Here are key takeaways that investors can learn from the HSBC Global Asset Management case:
Keep track of your investments
Read your monthly statements. Be aware of how your money is allocated, and make sure it aligns with what you originally indicated to your advisor.
File a complaint
If you think you have not been treated fairly by an advisor (a “registrant”), send a written complaint to that individual or firm as it might lead to a fair resolution.
Escalate if necessary
If filing a complaint with the registrant doesn’t lead to an acceptable outcome, contact your provincial or territorial securities regulator, or the Ombudsman for Banking Services and Investments.
To read more about the BCSC’s settlement with HSBC Global Asset Management (Canada), click here.