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

The source familiar with the matter told Reuters that the UK-headquartered bank, which is currently looking to sell its wealth and retail banking businesses in Zambia, was facing "enforcement action" for two breaches of SEC rules following a months-long investigation.

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

In addition, the SEC found Standard Chartered had also used "exclusionary" contract clauses, which meant the client held all responsibility for the risks, which goes against Zambia's securities rules.

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

"We are fully aware of this matter, and we are reviewing the necessary details to clarify the situation. It is our priority at the Bank to ensure compliance with regulatory standards across all of our markets."

The SEC, which started its investigation of the case in April, said it was not able to comment on the matter when asked by Reuters. Under Zambia's Securities Act, 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 can't formally order them to compensate customers for mis-selling.

Reuters wasn't able to establish what penalty the regulator is planning to impose on Standard Chartered.

The lender announced in November it was looking to sell its Zambian wealth and retail banking businesses alongside those in nearby Botswana and Uganda.

It has operated in Zambia for nearly 120 years making it the country's oldest bank.

It is currently reducing its overall footprint in Africa, however, having also sold its Tanzania business and subsidiaries in Angola, Cameroon, The Gambia, and Sierra Leone in the last couple of years.

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