HSBC Global Asset Management (Canada) Limited is being sanctioned by the British Columbia Securities Commission (BCSC) after it admitted that it required clients to redeem their units in HSBC-branded mutual funds, causing them financial harm, investment losses and unanticipated tax consequences.
The forced redemptions were completed by June 2016 after the firm decided in 2014 that it was terminating agreements with 51 independent dealers which no longer aligned with the firm’s overall strategic focus. As part of its plan to terminate the dealer agreements, the firm also required investors who bought units from these dealers to redeem them. The total market value of the required redemption was approximately $21.9-million, affecting 1,042 client accounts.
The BCSC says the firm “admitted that requiring people to redeem their units early was unfair, because investors were initially told that the funds were suitable for long-term investment time horizons. In addition to the investment losses and tax consequences, the redemptions may have also led to lost investment opportunities and potential re-acquisition costs to replace investments,” they write.
“As a result, (HSBC Global Asset Management) – a registered portfolio manager, exempt market dealer and subsidiary of HSBC Bank Canada – has agreed to pay up to $700,000 to investors who suffered financial harm. The firm will also pay $350,000 to the BCSC, plus any part of the $700,000 not paid to investors.”
