Unliensed Securities Business of Bank

Over the past couple of years, we had witnessed enforcement cases of SFC in cooperation with HKMA against unlicensed dealing of staff in two banks, namely, Wing Lung Bank and DBS Bank (HK). However, in none of these cases the concerned bank was disciplined. The latest case published by SFC about ICICI Bank is somewhat special.

According to its website, ICICI Bank is India's second largest bank. It is a HKMA licensed bank but not a SFC registered institution. SFC has prosecuted ICICI Bank and several senior officers of the bank for carrying on a securities business and dealing in securities without an SFC licence.

ICICI Bank established a securities business in HK through some of its employees in approximately Jun 2004, selling securities and unauthorised investment products to HK investing public. The unlicensed business was then carried on by ICICI Bank since Oct 2005 until it was detected by HKMA and referred to SFC for investigation in Mar 2006.

SFC has also prosecuted ICICI Bank's former CEO and its former Head of Private Banking, for aiding and abetting the bank in carrying on the unlicensed securities business. Five current and former staff have also been charged by the SFC with unlicensed dealing in securities. ICICI Bank and four staff were fined and ordered to pay the investigation costs.

I know that ICICI Bank was granted the banking licence by HKMA in Oct 2005. If the Bank established the securities business in Jun 2004, I wonder if it had also engaged in unlicensed banking business before Oct 2005.

In recent years, more and more financial institutions (banks and non-banks) from emerging markets have established their business in HK. Without conducting a sufficient research into HK's regulatory regime, they are indeed running a high risk of breaching the law.

P.S. I heard from a source that last year this bank had urgently looked for a compliance officer. Hopefully nobody has joined this "pirate ship"!