Written by Mark Jones and Chris Mvula
LONDON (Reuters) – The Zambian Securities and Exchange Commission has imposed sanctions on Standard Chartered Bank (OTC:) for allegedly misselling bonds of a Chinese real estate company to one of the bank's local wealth clients at the height of the Asian country's real estate crisis. According to a source.
The UK-based bank, which is currently looking to sell its wealth and retail banking business in Zambia, faces “enforcement action” over two violations of SEC rules after a months-long investigation, the source familiar with the matter told Reuters.
The first is that it failed to disclose “material information” about the bonds it sold in March 2022. Those bonds, issued by Chinese state-backed developer Sino-Ocean, defaulted after just over a year and are now, like many… bonds in the world. The sector is almost worthless.
In addition, the SEC found that Standard Chartered Bank also used “exclusionary” contract terms, meaning the client assumed all responsibility for the risks, which is contrary to Zambian securities rules.
“We respect the findings of the Zambia Securities Commission, but in accordance with appropriate domestic procedures, we will respectfully exercise our right of appeal,” Standard Chartered said in a statement to Reuters.
“We are fully aware of this matter and are reviewing the details necessary to clarify the situation. It is a priority for us at the bank to ensure compliance with regulatory standards in all our markets.”
The Securities and Exchange Commission, which began its investigation into the case in April, said it could not comment on the matter when asked by Reuters. Under Zambia's securities law, Standard Chartered Bank now has 30 days to file its appeal.
The Zambia Securities and Exchange Commission has the power to fine lenders, or “censure or reprimand” them publicly or privately, although it cannot formally order them to compensate customers for mis-selling.
Reuters was unable to determine the penalty that the regulatory body plans to impose on Standard Chartered Bank.
The bank announced in November that it was looking to sell its wealth and retail banking businesses in Zambia along with those in neighboring Botswana and Uganda.
It has been operating in Zambia for nearly 120 years making it the oldest bank in the country.
It is currently working to reduce its overall footprint in Africa, having also sold its business in Tanzania and subsidiaries in Angola, Cameroon, Gambia and Sierra Leone in the past two years.
