Azernews.Az

By Bloomberg

HSBC Holdings Plc is blocked from taking on new funds at its Saudi Arabian asset management business after the regulator found that it breached local regulations, according to people with knowledge of the matter.

The order from the country’s Capital Market Authority was made late last year and affects HSBC Saudi Arabia Ltd.’s $7 billion asset management arm, the people said, asking not to be identified as the notice wasn’t made public. HSBC Saudi Arabia must overhaul compliance procedures before the regulator will consider reversing the ban, according to two of the people.

The action by the CMA, as the Saudi Arabian regulator is known, relates to local rules and isn’t connected to other investigations the bank faces, two of the people said. HSBC has been under scrutiny by regulators around the globe and paid a $1.9 billion settlement in 2012 to end U.S. probes into money laundering. The bank paid $618 million in fines last year after a probe into the rigging of foreign-exchange benchmarks.

A spokesman for HSBC Saudi Arabia declined to comment. The CMA didn’t respond to calls or an e-mail seeking comment.

HSBC Saudi Arabia managed about $7 billion of assets in mutual funds and discretionary portfolios at the end of 2013, according to the latest available annual report for SABB, the Saudi Arabian affiliate of HSBC. SABB also owns 51 percent of HSBC Saudi Arabia, and HSBC owns 40 percent of SABB.

The asset management arm of HSBC Saudi Arabia offers more than 20 mutual funds. The discretionary portfolio-management services cater to corporate and institutional clients as well as wealthy individuals, according to its website.

Osama Shaker, the head of asset management for HSBC Saudi Arabia, left the bank after nine years in the role last July, while Walid Khoury, the chief executive officer for HSBC’s Saudi arm left in September, the lender confirmed at the time, without giving a reason for their departure. HSBC appointed Majed Najm as chief executive of its Saudi operations in January, two people with knowledge of the matter told Bloomberg.