On November 11, 2019, the Hong Kong Securities and Futures Commission (“SFC”) announced that UBS Financial Services (“UBS”) was fined $51.09 million for overcharging thousands of clients throughout the last decade. The SFC said in its statement that their investigation found that UBS overcharged up to 5,000 clients on “post-trade spread increases,” and that these charges were far in excess of standard firm fee disclosures and rates. UBS also agreed to pay approximately $25.5 million in restitution to affected clients.
According to the SFC, UBS stated that the investigation was triggered by a self-reported discovery of systemic internal control failures. Most firms have compliance software in place that prevents fees or spread markups in excess of certain ratios, with manual overrides required to circumvent these controls. Based on the SFC statement, it was unclear to the public which specific internal controls were breached and whether the breaches were caused by software or human error. UBS issued the following response to the SFC statement:
The relevant conduct predominately relates to limit orders of certain debt securities and structured note transactions, which account for a very small percentage of the bank’s order processing system.