HSBC to Pay $101.5 Million to Resolve Federal Fraud Charges
January 18 2018 - 08:03PM
Dow Jones News
By Maria Armental
HSBC Holdings PLC has agreed to pay $101.5 million to resolve
federal fraud charges stemming from the bank's misuse of
confidential client information for its own profit, a practice
commonly known as front-running.
In documents filed Thursday in Brooklyn federal court, HSBC
admitted to using confidential information in two instances for its
own profit.
In one March 2010 transaction, it converted approximately GBP5.3
billion ($7.4 billion) to U.S. dollars for a client -- identified
in court documents only as a financial-services company -- that
resulted in a $38.4 million profit for HSBC. In a second
transaction in December 2011 for Cairn Energy PLC, an
Edinburgh-based oil-and-gas company, HSBC converted about $3.5
billion to British pounds that resulted in a roughly $8 million
profit for the bank.
Front-running typically involves a trader jumping ahead of a
client's order, buying or selling for their own account to profit
when the larger transaction moves a price.
A related federal probe into foreign exchange-rate manipulation
led to the conviction of a former high-ranking HSBC executive and
charges against a second one.
As part of the proposed resolution, the British bank entered
into a three-year deferred-prosecution agreement with the Justice
Department and agreed to pay a $63.1 million criminal penalty,
continue to cooperate in investigations and prosecutions,
strengthen its compliance program and pay back $38.4 million in
gains. The bank had previously settled for about $8 million with
Cairn Energy.
The agreement must be approved by a judge.
Such agreements, a common tool in the U.S. in corporate
prosecutions, give the alleged wrongdoer a chance to cooperate with
prosecutors in exchange for a less-punitive outcome -- typically a
fine, admission of wrongdoing and taking measures to improve
compliance. Under such agreements, the company is charged but
criminal proceedings are suspended as long as conditions of the
agreement are met.
HSBC said in a statement it has strengthened its controls and
would continue to make more changes. "HSBC is committed to ensuring
fair outcomes for our customers and protecting the orderly and
transparent operation of the markets," spokesman Rob Sherman said
in an email.
Write to Maria Armental at maria.armental@wsj.com
(END) Dow Jones Newswires
January 18, 2018 19:48 ET (00:48 GMT)
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