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Screenshot of a breaking news alert e-mail from Q2 2017
HSBC has been the subject of very costly regulatory censuring recently, the latest of which being yesterday’s agreement by the bank’s Swiss private banking operation to pay $12.5 million in settlement for soliciting US clients without holding the relevant US regulatory approval, preceded very recently by the bank being responsible for part of the $3.3 billion in fines from global regulators for manipulation of FX rates alongside five other major financial institutions.
These high value penalties are unlikely to be the last time that HSBC, which is part owned by the British government following its insolvency in 2008’s financial crisis, will have to part with a substantial sum.
Yesterday it was reported by the Wall Street Journal that the U.S. Justice Department is investigating allegations that an employee of HSBC Holdings PLC leaked confidential client information to a major hedge fund.
Should the Department of Justice’s investigation amount to a conviction, it may serve as another indicator to regulators that systems used within large banks are allowing too much confidential information to be distributed in favor of the banks, with detrimental effects on the investing public and related institutions.
Following the finalization of the global investigation into currency rate manipulation, LeapRate reported that instant messenging facilities were used by FX traders to not only orchestrate a series of rate manipulations, but also to explicitly boast about their antics. The use of professional messaging services has been commonplace among global trading desks, however certain organizations are now considering isolating traders who are charged with the responsibility of establishing benchmarks.
U.S. prosecutors are currently interviewing HSBC traders about the alleged event, which is believed to have taken place in March 2010, as part of their broader criminal investigation into improprieties in the currencies markets, these people say.
The alleged event, which HSBC self-reported to U.S. and British authorities and is being examined as part of a U.S. criminal investigation, happened when HSBC was advising a major client, British insurer Prudential PLC, on a huge acquisition and was working on a related multibillion-dollar currency transaction.
The focus of this particular HSBC investigation suggests that the U.S. is setting its sights on market-sensitive information that banks may have shared with favored clients, not just fellow banks. It also introduces the prospect that actions by bank traders might have contributed to sharp swings in currencies.
The events in question surround HSBC helping Liverpool-based insurance company Prudential sell billions of pounds and buy billions of dollars to finance the insurer’s planned $35 billion acquisition of the Asian life-insurance unit of American International Group Inc.