By Marc Jones and Chris Mfula

LONDON (Reuters) – Zambia’s Securities and Exchange Commission (SEC) has fined Standard Chartered for improperly selling the bonds of a Chinese real estate company to one of the bank’s local clients at the height of the Asian country’s property crisis, according to a source .

The source familiar with the matter told Reuters the UK-based bank, which is currently looking to sell its wealth and retail banking businesses in Zambia, faces “enforcement action” over two defaults of SEC rules after a months-long investigation.

The first was that it had failed to disclose “material information” about bonds it sold in March 2022. Those bonds, issued by state-backed Chinese developer Sino-Ocean, defaulted just over a year later and now, like many in the sector, almost worthless.

In addition, the SEC found that Standard Chartered had also used “exclusive” contractual clauses, which meant that the client had full responsibility for the risks, which was against Zambia’s securities rules.

In a statement to Reuters, Standard Chartered said: “We respect the outcome of the Securities Exchange Commission in Zambia but, in accordance with appropriate local procedures, we will respectfully exercise our right to appeal.”

“We are fully aware of this matter and are reviewing the necessary details to clarify the situation. It is our priority at the Bank to ensure compliance with regulatory rules in all our markets.”

The SEC, which began investigating the case in April, said it could not comment on the matter when asked by Reuters. Under the Securities Act of Zambia, Standard Chartered now has 30 days to lodge its appeal.

Zambia’s SEC has the power to fine, or publicly or privately “censure or reprimand” lenders, although it cannot formally order them to compensate customers for mis-selling.

Reuters was unable to establish what penalty the regulator plans to impose on Standard Chartered.

The lender announced in November that it wanted to sell its Zambian retail banking and wealth businesses along with those in nearby Botswana and Uganda.

It has operated in Zambia for almost 120 years, making it the oldest bank in the country.

However, it is currently reducing its global footprint in Africa, having also sold its Tanzanian business and subsidiaries in Angola, Cameroon, Gambia and Sierra Leone in the past two years.

(Additional reporting by Chris Mfula in Lusaka. Editing by Elisa Martinuzzi and Mark Potter)