Exclusive-Zambia’s SEC sanctions Standard Chartered for misselling property bonds in China, Reuters source says
By Marc Jones and Chris Mfula
LONDON (Reuters) – Zambia’s Securities and Exchange Commission (SEC) fined Standard Chartered (OTC:) for misselling bonds of a Chinese real estate firm to one of the bank’s local wealthy clients at the height of the Asian country’s real estate crisis, according to a source.
A source familiar with the matter told Reuters the UK-based bank, which is currently looking to sell its wealth and retail banking operations in Zambia, is facing “enforcement proceedings” over two breaches of SEC rules following a months-long investigation.
The first was that it failed to disclose “material information” about bonds it sold in March 2022. Those bonds, issued by China’s state-backed Sino-Ocean development program, defaulted just over a year later and are now, as of many in the sector, almost worthless.
In addition, the SEC found that Standard Chartered also used contractual “exclusion” clauses, which meant that the client bears all responsibility for the risks, which is against Zambian securities rules.
In a statement to Reuters, Standard Chartered said: “We respect the outcome of the Zambia Securities Exchange Commission, however, in accordance with appropriate local procedures, we will respectfully exercise our right of appeal.”
“We are fully aware of this matter and are considering the necessary details to clarify the situation. Our priority at the Bank is to ensure compliance with regulatory standards in all our markets.”
The SEC, which began investigating the case in April, said it could not comment on the matter when asked by Reuters. Under the Securities Act of Zambia, Standard Chartered now has 30 days to lodge an appeal.
Zambia’s SEC has the power to fine, publicly or privately “criticize or reprimand” lenders, although it cannot formally order them to compensate customers for mis-selling.
Reuters was unable to determine what fine the regulator plans to impose on Standard Chartered.
The lender announced in November that it intended to sell its Zambia assets and retail business along with those in nearby Botswana and Uganda.
It has been operating in Zambia for almost 120 years, making it the oldest bank in the country.
It is currently reducing its overall footprint in Africa, however, it has also sold its operations in Tanzania and subsidiaries in Angola, Cameroon, Gambia and Sierra Leone in the past few years.
