The renminbi’s unexpected decline this year has turned profits into losses for many Taiwanese investors who bet on the rising Chinese currency.
Regulators have put part of the blame on some financial institutions that didn’t adequately warn investors of the risks involved in putting their yuan savings into complex derivative products.
In a statement released Monday, the island’s Financial Supervisory Commission said Taipei-based Bank SinoPac, a medium-sized lender, has agreed to stop selling derivatives that bet on the Chinese yuan for at least a year, the Wall Street Journal reported.
The move is part of a settlement with the regulator over misleading clients into overinvesting in leveraged products, the report said.
The bank, in which Industrial & Commercial Bank of China (01398.HK, 601398.CN) plans to acquire a 20 percent stake, didn’t fully disclose to clients the risks involved in its so-called target redemption forwards, the newspaper said, citing the FSC statement. It also failed to limit the amount sold based on clients’ risk tolerance and ensure they understood the product, the regulator said.
The FSC also asked Bank SinoPac to draft a compensation plan for its clients over improperly sold derivatives, to review its internal bonus system over the sale of high-risk financial products and to penalize staff who failed to comply with sales guidelines, the report said.
– Contact HKEJ at [email protected]