HSBC, one of the biggest private-client brokers in Britain with two million customers, was yesterday fined £100,000 by the Financial Services Authority (FSA), the regulator.

From December 2002 until August this year, HSBC inadvertently described to the FSA every client share purchase as a sale and every share sale as a purchase.

The mistake came to light only when FSA investigators examining the dealings of a suspected insider dealer were puzzled to find the suspect apparently selling ahead of a positive announcement and buying afterwards, instead of the other way around.

The penalty comes only four weeks after the FSA fined the wealth management arm of UBS £100,000 for a similar mistake lasting five years.

The FSA said that HSBC’s error “could have impacted on the ability of the FSA to investigate irregular or unusual transactions which may have involved market misconduct”.

HSBC said it regretted the “technical failures” and took the matter extremely seriously. It emphasised that the failures caused no financial loss or inconvenience to customers.

About 900,000 trades were reported inaccurately to the FSA, HSBC said. Checks and double-checks failed to flush out the error, it admitted. “Our systems have now been amended and controls changed to prevent a recurrence, as the FSA noted in its statement,” it said.

It is understood that no one in HSBC was dismissed over the error.

The FSA’s insider-dealing unit is routinely furnished with every share transaction so that it can screen them for potential market abuses. The regulator played down the fact that it had failed to spot that it had been provided with wrong information by two of the stock market’s largest players for years.

The onus was on firms to provide accurate information, an FSA spokesman said. “We cannot be expected to make sure the banks’ systems are all correct.” He said the fines would focus attention on the issue.

The error at HSBC was because of a mix-up over whether it was reporting transactions from the perspective of the client or itself. HSBC said that it was pleased that the FSA had, in its statement, recognised that HSBC has taken steps to correct its systems and controls while co-operating fully with the investigation.

The FSA is now working through the resubmitted trades for any evidence of market abuse. The regulator said that, in setting the level of penalty against HSBC it took into account the length of time that inaccurate reporting took place and the number of inaccurate transactions reported.

Three business lines within HSBC Stockbroker Services were found to be guilty of inaccurate reporting — branch certified share dealing, branch non-certified share dealing and InvestDirect.

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