Washington, D.C. – The Commodity Futures Trading Commission (CFTC) has issued an order simultaneously filing and settling charges against HSBC Bank USA, N.A., HSBC Securities (USA) Inc., and HSBC Bank plc (collectively, the HSBC Affiliates). The charges center around failures in maintaining, preserving, and producing records as required by CFTC regulations, as well as a lack of diligent supervision over their businesses.
The HSBC Affiliates have admitted to the facts outlined in the CFTC’s order and have agreed to cease and desist from further violations of recordkeeping and supervision requirements. They are also obligated to undertake specific remedial measures to address the identified deficiencies.
“Recordkeeping requirements are critical to the Commission’s oversight of registrants, and when a registrant disregards its obligations, it undermines the Commission’s ability to effectively and efficiently conduct examinations and investigations,” stated Ian McGinley, Director of Enforcement at the CFTC. “This action, and previous ones, demonstrate the Commission’s commitment to enforcing compliance with recordkeeping, supervision, and other regulatory obligations.”
According to the order, for several years, the HSBC Affiliates failed to prevent employees, including those in senior positions, from utilizing unapproved communication methods such as personal text messages and WhatsApp for business-related discussions. These communications, which pertained to the HSBC Affiliates’ CFTC-regulated businesses, were not adequately maintained or preserved, hindering the firms’ ability to promptly provide them to the CFTC when requested.
The use of these unapproved communication channels violated HSBC’s internal policies, which generally prohibited business communications on such platforms. Notably, supervisory personnel responsible for enforcing these policies were also found to have engaged in business communications through non-approved methods.
The CFTC’s Division of Enforcement uncovered these practices during investigations into certain of HSBC’s trading activities. Following a review, HSBC informed CFTC staff of the widespread and longstanding use of unapproved communication methods by its employees. This resulted in the loss of potentially hundreds or thousands of business-related communications, including crucial transaction records and pre-execution communications related to commodities and swaps businesses.
The order concludes that each HSBC registrant failed to diligently supervise its business as a CFTC registrant, violating CFTC recordkeeping and supervision provisions. The Securities and Exchange Commission (SEC) has also filed a related civil action.
Source: CFTC.gov
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