The Securities and Exchange Commission is charging HSBC Private Bank (HSBC) with violating U.S. federal securities laws. According to the regulator, the Swiss private banking arm did not register with the agency before providing clients in this country with cross-border brokerage and investment advisory services.
HSBC Private Bank as agreed to pay $12.5 million to resolve the SEC’s charges. It is also admitting to wrongdoing.
According to the SEC order over the settled administrative proceedings, the private banking arm and its predecessors started providing the services at issue over 10 years ago, growing its clients base to up to 368 U.S. accounts while collecting about $5.7 million in fees. Banking personnel came to this country over three dozen times to solicit clients, offer advice, and fulfill securities transactions. The managers who completed these tasks were not registered to provide these services nor were they affiliated with a registered brokerage firm or investment adviser. These managers also communicated via e-mail and postal mail with clients in the U.S.
HSBC Private Bank left the U.S. cross-border business in 2010, closing almost all of its client accounts here or moving them by the end of 2011.
The SEC says that the private banking arm knew that it was at risk of violating federal securities laws with its managers’ actions and even put into place specific compliance initiatives to manage and mitigate risks. According to the regulator’s order, HSBC violated on purpose certain sections of the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940.
HSBC has admitted to the facts presented in the SEC’s order, acknowledging that it violated federal securities laws. In addition to accepting a cease-and-desist order and a censure, the bank consented to pay over $5.7 million in disgorgement, $4.2 million in prejudgment interest, and a $2.6 million penalty.
Read the SEC Order (PDF)
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