The Swiss-based private banking unit of HSBC Holdings plc (ADR) (NYSE:HSBC) (LON:HSBA) agreed to pay $12.5 million penalty to settle the claims of the Securities and Exchange Commission (SEC).
HSBC Private Bank admitted wrong doing
The SEC alleged that HSBC Private Bank (Suisse) violated federal securities laws for failing to register before providing cross-border brokerage and investment advisory to its clients in the United States.
In a statement, Andrew Ceresney, director of enforcement division of the SEC said, “HSBC’s Swiss private banking unit illegally conducted advisory or brokerage business with U.S. customers. HSBC Private Bank’s efforts to prevent registration violations ultimately failed because their compliance initiatives were not effectively implemented or monitored.”
HSBC Private Bank (Suisse) admitted its violation and agreed to pay the fine imposed by the commission.
Details of the allegations against HCBC Private Bank
According to the SEC, HSBC Private Bank and its predecessors started providing cross-border advisory and brokerage services in the United States more than ten years ago.
The Swiss-based private banking unit of HSBC Holdings plc (ADR) (NYSE:HSBC) (LON:HSBA) accumulated as 368 U.S. client accounts and $5.7 million in total fees during that period. The SEC emphasized that the personnel of the HSBC Private Bank solicited clients in the United States on at least 40 occasions and provided investment advice and made securities transactions. They also communicated with U.S. clients through overseas mail and e-mails.
According to the SEC, those relationship managers were not registered to provide such services and were not affiliated with a registered investment adviser or broker-dealer.
The Swiss-based private banking unit of HSBC Holdings plc (ADR) (NYSE:HSBC) decided to exit is cross-border business in 2010, almost all of its U.S. client accounts were closed or transferred by the end of 2011.
The SEC said HSBC Private Bank understood its risk of violating the federal securities laws by providing unregistered broker-dealer and investment advisory services to U.S. clients.
The firm tried to mitigate the risk by implementing certain compliance initiatives such as creating a dedicated North American desk to consolidate its U.S. client accounts. Its relationship managers were reluctant to lose clients by transferring them to the North American desk. The internal reviews on HSBC Private Bank revealed multiple occasions when U.S. accounts that were expected to be closed under certain compliance initiatives remained open.
HSBC Private Bank accused of tax fraud in Belgium
Last week, the Swiss private banking unit of HSBC Holdings plc (ADR) (NYSE:HSBC) was accused of tax fraud in Belgium. Authorities in the country alleged that HSBC Private Bank helped more than 1,000 wealthy clients to avoid paying taxes on assets worth hundreds of millions of euros.
