Societe Generale settles case in Hong Kong

Societe Generale S.A. has agreed to pay US$11 million to Hong Kong customers mislead by a hidden commission fee.

The second largest French financial services firm will reimburse customers full values of fees and charges it retained without first disclosing them after a reprimand from the Securities & Futures Commission for internal control failures at its wealth management activities in its Hong Kong branch. Societe Generale said it will pay back the fees with interest but did not admit liability.

In some 3,000 transactions between April 2003 and January 2006, it appears customers of Societe Generale’s wealth management activities paid or received a different price for over-the-counter products compared to the actual price transacted for them by the bank. The difference was retained as a fee by Societe Generale.

It appears Societe Generale did not disclose this fee to its customers nor was the fee disclosed as a commission in the resulting contract notes issued to each customer. Its internal controls and systems in its wealth management activities had failed to ensure customers were fairly treated in transacting over-the-counter products in the secondary market.

Societe Generale has also agreed to engage an independent reviewer to assess the amount to be paid to eligible customers and to review the controls, systems and procedures of the its Wealth Management Unit in Hong Kong in relation to its current practice in charging customers in over-the-counter transactions.

The Hong Kong Monetary Authority welcomed the outcome, and will continue to follow up with Societe Generale to ensure that it has duly complied with the terms of the resolution.