The Securities and Exchange Commission charged HSBC’s Swiss private banking unit with providing unregistered services to U.S. clients.
Also among recent enforcement actions by the SEC were charges against a then-CEO snd his close friend for insider trading and against father and son executives at a penny stock company for issuing phony press releases to drive up the price of the stock so they could sell their shares.
HSBC Private Bank Hit with $12.5 Million, Admits Wrongdoing to SEC
The SEC has charged the Swiss-based private banking arm of HSBC with violating federal securities laws by failing to register with the agency before providing cross-border brokerage and investment advisory services to U.S. clients. To settle the charges, HSBC Private Bank (Suisse) has agreed to admit wrongdoing and pay $12.5 million.
According to the SEC, HSBC Private Bank and its predecessors began providing cross-border advisory and brokerage services in the U.S. more than 10 years ago, accommodating as many as 368 U.S. client accounts and collecting fees totaling approximately $5.7 million.
Personnel traveled to the U.S. on at least 40 occasions to solicit clients, provide investment advice and induce securities transactions. These relationship managers were not registered to provide the services they rendered, nor were they affiliated with an RIA or a broker-dealer. The relationship managers also communicated directly with clients in the U.S. through overseas mail and emails.
In 2010, HSBC Private Bank decided to exit the U.S. cross-border business, and nearly all of its U.S. client accounts were closed or transferred by the end of 2011.
The agency said that HSBC Private Bank understood the risk of violating the federal securities laws by providing unregistered broker-dealer and investment advisory services to U.S. clients, and the firm undertook certain compliance initiatives in an effort to manage and mitigate the risk, including the creation of a dedicated North American desk. This was designed to consolidate U.S. client accounts among a smaller number of relationship managers and service them in a compliant manner that would not violate U.S. registration requirements.
However, relationship managers didn’t want to lose clients by transferring them to the North American desk. As a result, HSBC Private Bank’s internal reviews revealed multiple occasions when U.S. accounts that were expected to be closed under certain compliance initiatives remained open.
HSBC Private Bank has agreed to admit the facts in the SEC’s order, acknowledge that its conduct violated the federal securities laws, and accept a censure and a cease-and-desist order. The firm also agreed to pay $5,723,193 in disgorgement, $4,215,543 in prejudgment interest and a $2.6 million penalty.
CEO Shares Stock Tips Over Dinner, Fines Ensue
The SEC has charged William Redmond Jr. and his friend Stefano Signorastri with insider trading after the former shared insider information with the latter about nonpublic merger discussions at GenTek Inc., an engineering and chemical company where Redmond served on the board of directors in addition to being CEO.