HSBC Securities settled with the Investment Dealers Association of Canada Wednesday for market timing 14 mutual funds more than 800 times for one client between Jan. 1, 2002 and July 1, 2002. HSBC Canada agreed to pay $1,163,192 as part of the settlement.
During that time, HSBC ignored numerous warnings from the fund companies about how the market timing was in violation of their prospectuses and upsetting management of their portfolios to the detriment of long-term shareholders, according to regulators.
HSBC first made the Investment Dealers Association aware of its special market-timing arrangement with the one client, through its cooperation in market-timing survey the association issued in January 2004.
However, IDAC was not satisfied with all of the information it received from HSBC and other members of the self-regulatory body, and issued another survey in February of this year, prompting the brokerage to voluntarily provide additional records to IDAC in March. According to Market News Publishing, HSBC claimed its market-timing arrangement was unintentional.
"Timing and accurate self-reporting by firms is a critical component of effective self-regualtion," Jeff Kehoe, director of enforcement litigation with the Investment Dealers Association of Canada, said in a statement. "There can be no tolerance of failure to report fully and accurately.
"This settlement is based on longstanding principles and rules that go to the heart of what is appropriate conduct in a client-broker relationship."