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Screenshot of a breaking news alert e-mail from Q2 2017
HSBC Holdings plc (NYSE:HSBC) announced that it has entered into a three-year deferred prosecution agreement with the US Department of Justice (DoJ) to resolve the DoJ’s investigation into HSBC’s historical foreign exchange sales and trading activities within its Global Markets business.
Under the agreement, HSBC will pay a total of US$101.5m, including a US$63.1m fine and US$38.4m in restitution. The payment reflects a 15% reduction in the fine amount in recognition of HSBC’s cooperation during the investigation and its extensive remediation. The payment has already been fully provided for as disclosed in HSBC’s 2016 Annual Report and Accounts and the Interim Report 2017.
HSBC has also agreed to take additional steps to enhance its Global Markets compliance programme and internal controls and agreed to cooperate fully with regulatory and law enforcement authorities.
The conduct described in the agreement occurred in 2010 and 2011. Since then, HSBC has introduced a number of measures designed to make the control environment in its Global Markets business more robust. The DoJ recognises these extensive improvements, noting that HSBC has dedicated significant resources to strengthening its systems and controls. As described in the agreement, HSBC’s improvements in this area include, among other things:
- implementing algorithmic trading to manage risk around benchmark orders;
- updating its policies for sales, pricing, order handling, managing confidential client information and conflicts of interest, pre-hedging, and market abuse; and
- engaging outside firms to audit its internal controls and to enhance its trade, voice, and audio surveillance.
This agreement follows earlier settlements relating to HSBC’s FX trading business with the UK Financial Conduct Authority and US Commodity Futures Trading Commission in November 2014 and with the US Federal Reserve Board in September 2017 related to controls and procedures.