The bank has plans to commence a remediation process. Photo: Matthew MirabelliHSBC employees have accused the bank of discrimination for refusing to compensate them for losses incurred through “complex investments” it sold to them without conducting an “appropriateness assessment”.
Under EU law, an assessment was mandatory to ensure that clients had the necessary expertise to handle such an investment before committing themselves to paying huge sums of money, the employees noted. If the procedure was not followed, customers who subsequently lost their investments could be eligible for compensation, they added.
HSBC said in a company announcement last February that a provision of €8 million had been made in relation to “a legacy operational and regulatory failure in the bank’s now-closed brokerage business”.
Following discussions with the Malta Financial Services Authority, earlier this month, the bank said it planned to commence a remediation process. The matter affected about 1,300 customers, some of whom had lost over €100,000, banking sources said.
A few days ago, the Independent Bankers’ Union issued a circular letter saying it had formally asked the MFSA to look into complaints that some of its members had been “discriminated” against.
The bank’s decision was based on a subjective exercise to deny compensation
Noting that “other” customers – the term used by HSBC to describe clients who lack the necessary experience to handle complex investments – had already been contacted by the bank and notified about compensation, a group of about 50 HSBC staff who had also acquired such products were treated differently, the union said.
“The union cannot but denounce in the strongest possible manner the unilateral and arbitrary decision of the bank to discriminate against these employees and ex-employees,” the union’s letter read.
The decision, it added, was based on a subjective categorisation exercise that “conveniently” relegated the affected employees to a category of investors not entitled to compensation.
Known as “experienced” customers, such clients were deemed to have the required experience to purchase complex investment products and therefore warranted no appropriateness assessment before purchasing the product, the union continued.
It noted that, in 2007, the bank had assured employees they would enjoy the full protection of the law, in line with the EU’s Markets in Financial Instruments Directive, which came into force that year.
While urging affected staff members to contact the union, members were told that last Friday, the MFSA confirmed it was looking into the matter.
An HSBC spokesman said yesterday that the bank’s self-initiated review of complex instruments sold under the EU directive had been announced in February and involved an extensive, independent legal and regulatory review. He said that HSBC had directly contacted customers to inform them about the approach being followed.
“If a bank employee is in scope of the review, this is solely due to the fact that they are a customer of the bank, not because they are an employee,” the spokes-man added.
He noted that the bank would continue to update its customers, including those who were employees, and respond to any questions including those from the Malta Union of Bank Employees, which enjoys official recognition at HSBC.
An MUBE spokesman confirmed that talks with the management were ongoing to ensure there was no negative impact on employees.