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HSBC Holdings Plc will pay a combined $75 million to settle a top US regulator’s allegations that it engaged in manipulative and deceptive trading practices and broke recordkeeping rules.
The Commodity Futures Trading Commission (CFTC) said that a US unit of the London-based bank would pay $45 million over its past trading related to swaps and bond issuances, among other alleged misconduct. HSBC entities also agreed to pay $30 million to settle a separate CFTC probe into unauthorised use of unapproved communication tools, including personal phones and WhatsApp.
“The bank is pleased to put these matters behind us, and we appreciate that both the SEC and CFTC recognise our commitment to remediating our internal controls when needed,†Matt Ward, an HSBC spokesman, said in a statement.
The bank paid a $15 million fine to the US Securities and Exchange Commission (SEC) for unauthorised WhatsApp use, among other alleged misconduct related to communications.
“In recent years, we have made significant investments in enhancing our compliance procedures and have worked diligently to maintain the highest standards for professional conduct throughout our organisation,†Ward added.
HSBC didn’t admit or deny the regulator’s allegations related to spoofing and trading activity. However, the firm did admit to the conduct in the $30 million settlement related to unapproved communications tools.
The CFTC alleged that HSBC traders manipulated prices to increase the profitability of swaps that the bank entered into with firms that were issuing bonds. In one instance cited in the regulator’s settlement order, the bank’s head of North American rates allegedly directed a trader to engage in manipulative trading.
“The commission has zero tolerance for manipulative, deceptive or spoofing transactions†said Ian McGinley, the CFTC’s enforcement chief, in a statement.
The probe into the use of communications tools like WhatsApp found longstanding and widespread lapses by HSBC staff. Some senior staff at the bank in charge of compliance — including managing directors and senior supervisors — used unapproved communications tools on their personal devices, which were generally not monitored.
Under regulators’ rules, firms must monitor their employees’ communications with clients to track conduct. In addition to large Wall Street banks, major private equity firms and hedge funds are also being probed for their use of apps and personal phones.
In September, a dozen banks, including Goldman Sachs Group Inc and Citigroup Inc, agreed to pay $1.8 billion in penalties to the SEC and the CFTC to settle allegations that they failed to properly track employee chats.