HSBC Holdings Plc has recently agreed to pay a $75 million settlement to the U.S. Commodity Futures Trading Commission (CFTC). The charges were related to manipulative and deceptive trading practices, as well as record-keeping failures within several units of the global banking and financial services organization.
HSBC Bank USA, in particular, has agreed to a $45 million civil penalty in connection with swaps, spoofing, and record-keeping failures. Other entities within the HSBC group, including HSBCA Bank USA, HSBC Bank Plc, and HSBC Securities, admitted to charges associated with record-keeping and supervision failures, agreeing to a collective $30 million settlement.
The charges allege that between March 2012 and April 2016, HSBC traders engaged in manipulative and deceptive trading involving interest rate swaps and other financial products. In certain instances, bank supervisors were aware of this conduct, with one instance involving a senior manager who directed the wrongdoing. Notably, HSBC neither admitted nor denied these charges.
The CFTC also identified that HSBC failed to prevent employees, including senior staff and compliance personnel, from discussing work-related matters using personal messaging platforms such as WhatsApp and text messages. This failure to maintain records can obstruct oversight and investigations into potential misconduct, a factor that has recently been under intense scrutiny by regulators.
This settlement comes on the heels of a penalty imposed on HSBC by the U.S. Securities and Exchange Commission (SEC) for similar charges. The bank’s spokesperson emphasized their commitment to upholding professional conduct standards and the significant investments made in enhancing their compliance procedures in recent years.
HSBC’s situation is not unique. Other major banks have also faced regulatory scrutiny and fines in recent times. Notably, JPMorgan agreed to pay $200 million in fines to two U.S. banking regulators to settle charges related to employees’ use of WhatsApp and other platforms to evade federal record-keeping laws.
Morgan Stanley, after incurring fines exceeding $200 million last year for similar violations, has started penalizing employees for using personal messaging apps for company-related communications. However, critics argue that banning these tools may not be a viable long-term solution.
In a more drastic step, Deutsche Bank AG, after paying over $2 billion in fines, has begun docking the bonuses of employees found to have inappropriately used messaging services for business communications. The move highlights the ongoing repercussions from a widespread U.S. investigation that is causing ripples throughout the industry.
These recent developments underscore the importance of robust compliance procedures and proper record-keeping, as regulatory bodies continue to clamp down on violations. As the financial industry grapples with the implications of these enforcement actions, there’s a growing need for firms to reassess their internal controls, regulatory compliance, and communication policies to avoid hefty penalties and reputational damage.
