HSBC’s Swiss private banking unit has admitted violating federal security law by providing cross-border services to US clients without registering as providers with the Securities and Exchange Commission (SEC).
The SEC charged the bank, which admitted wrongdoing and agreed to pay $12.5 million to settle the charges.
According to the SEC’s order instituting settled administrative proceedings, the bank had been providing brokerage services for more than ten years and had about 368 clients, collecting fees totalling $5.7 million.
Un-registered staff travelled to the US to solicit clients, provide advice and induce securities transactions, and communicated directly with clients in the US through mail and email.
HSBC Private Bank exited the US cross-border business in 2010, and the majority of its client accounts were transferred or closed by the end of 2011.
Andrew Ceresney, director of the SEC’s Division of Enforcement, said: “HSBC’s Swiss private banking unit illegally conducted advisory or brokerage business with U.S. customers.”
According to the report, the bank was aware it was at risk of violating federal laws, and took initiatives to manage and mitigate that risk.
A dedicated desk was created to consolidate US client accounts and comply with the SEC requirements, but relationship managers were reluctant to lose clients by transferring them to the dedicated desk.
“HSBC Private Bank’s efforts to prevent registration violations ultimately failed because their compliance initiatives were not effectively implemented or monitored,” said Ceresney.
The SEC’s order found that HSBC Private Bank wilfully violated Section 15(a) of the Securities Exchange Act of 1934 and Section 203(a) of the Investment Advisers Act of 1940.
As well as the payment, HSBC accepted a censure and a cease-and-desist order.
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