Standard Chartered Sanctioned by Zambia’s SEC

By Marc Jones and Chris Mfula
LONDON (Reuters)
Zambia’s Securities and Exchange Commission (SEC) has sanctioned Standard Chartered for mis-selling bonds from a Chinese property company to a local client during a real-estate crisis in China.

According to a source familiar with the situation, Standard Chartered, which is considering selling its wealth and retail banking operations in Zambia, faces “enforcement action” due to two breaches of SEC regulations following a months-long investigation.

Breaches Identified

1. Failure to Disclose Material Information:
   The bank did not disclose crucial details about the bonds sold in March 2022. These bonds, issued by Sino-Ocean, a state-backed Chinese developer, defaulted more than a year later and are now nearly worthless.
2. Exclusionary Contract Clauses:
   The SEC found that Standard Chartered used contract clauses that placed all risk responsibility on the client, contrary to Zambia’s securities laws.

In a statement, Standard Chartered expressed respect for the SEC’s ruling but stated its intention to appeal, emphasizing its commitment to regulatory compliance. The SEC initiated its investigation in April and has advised that Standard Chartered has 30 days to file its appeal.

Zambia’s SEC possesses the authority to impose fines or issue public or private reprimands, but it cannot mandate customer compensation for mis-selling practices. The specific penalties that may be imposed on Standard Chartered remain unclear.

Standard Chartered announced in November its plans to divest from its Zambian wealth and retail banking segments, along with operations in Botswana and Uganda. The bank has been operational in Zambia for nearly 120 years, making it the oldest bank in the country. However, it is currently downsizing its presence across Africa, having already sold businesses in Tanzania, Angola, Cameroon, The Gambia, and Sierra Leone in recent years.