By Angela Chen
HSBC's Swiss-based private banking arm has admitted to the
Securities and Exchange Commission that it provided unregistered
brokerage and investment advisory services to U.S. clients, and it
will pay $12.5 million to settle the charges, the SEC said
Tuesday.
HSBC Private Bank will accept a censure and a cease-and-desist
order, and pay the $12.5 million, of which $2.6 million is a direct
penalty. A representative was not immediately available for
comment.
According to the SEC, the HSBC Private Bank began providing
cross-border services to clients in the U.S. more than a decade
ago. HSBC personnel traveled to the U.S. to induce securities
transactions, provide investment advice and solicit clients, and
also communicated from overseas via mail and emails.
During that time, the company amassed as many as 368 U.S. client
accounts and collected about $5.7 million in fees.
The SEC says that the bank knew there was a risk of violating
securities law by providing unregistered services to U.S. clients,
and created a North American desk to consolidate U.S. client
accounts and service them in a way that wouldn't violate
registration requirements. But internal reviews showed that
multiple accounts that were supposed to be closed remained open,
since relationship managers were reluctant to lose clients by
transferring them to the new, consolidated desk.
"HSBC Private Bank's efforts to prevent registration violations
ultimately failed because their compliance initiatives were not
effectively implemented or monitored," said Andrew J. Ceresney,
director of the SEC's Division of Enforcement.
In 2010, HSBC Private Bank exited the U.S. cross-border
business. Nearly all of its U.S. client accounts were closed or
transferred by the end of 2011.
Write to Angela Chen at angela.chen@wsj.com
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