Zambia’s Securities and Exchange Commission (SEC) has taken enforcement action against Standard Chartered Bank for mis-selling bonds issued by a Chinese property developer to a local wealth client during a period of heightened instability in China’s real estate market, according to a source familiar with the matter.
The UK-headquartered bank, which recently announced plans to divest its wealth and retail banking operations in Zambia, faces sanctions for breaching two SEC regulations. The first violation involves failing to disclose material information about the bonds sold in March 2022. These bonds, issued by state-owned Chinese developer Sino-Ocean, defaulted in just over a year and have since lost nearly all their value, mirroring broader challenges in China’s property sector.
The second breach relates to the use of contract clauses that transferred all risk responsibility to the client. According to the SEC, these exclusionary provisions contravene Zambian securities regulations, which prioritize transparency and consumer protection in investment contracts.
Standard Chartered’s Response
Standard Chartered acknowledged the SEC’s decision but confirmed its intention to appeal.
“We respect the outcome of the Securities and Exchange Commission in Zambia; however, we will be exercising our right to appeal in accordance with local procedures,” the bank stated. “We remain committed to regulatory compliance across all our markets and are reviewing the details to clarify the situation.”
Regulatory Context and Penalties
The SEC launched its investigation into the case in April 2023 but declined to comment further on its findings. Under Zambia’s Securities Act, the regulator can impose fines or issue public and private censures but lacks the authority to mandate compensation for affected clients. It remains unclear what specific penalties Standard Chartered will face, as Reuters could not confirm the extent of the planned enforcement measures.
Strategic Shifts in Africa
Standard Chartered has operated in Zambia for nearly 120 years, establishing itself as the country’s oldest bank. However, the bank has been scaling back its African operations. In November 2023, it announced intentions to sell its wealth and retail banking businesses in Zambia, Botswana, and Uganda. This follows prior exits from Tanzania, Angola, Cameroon, The Gambia, and Sierra Leone as part of a broader strategic repositioning.
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