HSBC 2015 Annual Report Download - page 455

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motion to dismiss the Consolidated Action, but granted defendants’ motion to dismiss the Foreign Actions. Five additional
putative class actions were subsequently filed in the New York District Court making similar allegations on behalf of persons
who engaged in foreign exchange futures transactions on a US exchange, and those additional actions were subsequently
consolidated with the Consolidated Action. In July 2015, the plaintiffs in the Consolidated Action filed a further amended
complaint that, amongst other things, added new claims and parties, including HSBC Securities (USA), Inc. In September 2015,
HSBC reached an agreement with plaintiffs to resolve the Consolidated Action, subject to court approval. In December 2015,
the court granted preliminary approval of the settlement, and HSBC made payment of the agreed settlement amount into an
escrow account. The court has not yet set a date for the final approval hearing.
In addition to the above actions, a putative class action was filed in the New York District Court in June 2015 making similar
allegations on behalf of Employee Retirement Income Security Act of 1974 (‘ERISA’) plan participants, and another complaint
was filed in the US District Court for the Northern District of California in May 2015. HSBC filed a motion to transfer the
California action to New York, which was granted in November 2015.
In September 2015, two additional putative class actions making similar allegations under Canadian law were issued in Canada
against various HSBC entities, including HSBC Bank Canada, and numerous other financial institutions.
As at 31 December 2015, HSBC has recognised a provision in the amount of $1.2bn. There are many factors that may affect the
range of outcomes, and the resulting financial impact, of these matters. Due to uncertainties and limitations of these
estimates, the ultimate penalties could differ significantly from the amount provided.
Precious metals fix-related litigation and investigations
Beginning in March 2014, numerous putative class actions were filed in the US District Courts for the Southern District of New
York, the District of New Jersey and the Northern District of California, naming HSBC and other members of The London Gold
Market Fixing Limited as defendants. The complaints allege that, from January 2004 to the present, defendants conspired to
manipulate the price of gold and gold derivatives during the afternoon London gold fix for their collective benefit in violation of
US antitrust laws, the CEA and New York state law. The actions were subsequently consolidated in the New York District Court.
An amended complaint was filed in March 2015, which defendants moved to dismiss. A hearing has been scheduled for March
2016.
Beginning in July 2014, numerous putative class actions were filed in the US District Courts for the Southern and Eastern
Districts of New York, naming HSBC and other members of The London Silver Market Fixing Ltd as defendants. The complaints
allege that, from January 1999 to the present, defendants conspired to manipulate the price of silver and silver derivatives for
their collective benefit in violation of US antitrust laws, the CEA and New York state law. The actions were subsequently
consolidated in the New York District Court. An amended complaint was filed in April 2015, which defendants moved to
dismiss. A hearing has been scheduled for March 2016.
Between late 2014 and early 2015, numerous putative class actions were filed in the US District Court for the Southern District
of New York, naming HSBC, and other members of The London Platinum and Palladium Fixing Company Limited as defendants.
The complaints allege that, from January 2008 to the present, defendants conspired to manipulate the price of platinum group
metals (‘PGM’) and PGM-based financial products for their collective benefit in violation of US antitrust laws and the CEA. An
amended complaint was filed in August 2015, which defendants moved to dismiss.
Additionally, in December 2015, a putative class action under Canadian law was filed in the Ontario Superior Court of Justice
against various HSBC entities, including HSBC Bank Canada, and other financial institutions. Plaintiffs allege that, from January
2004 to March 2014, defendants conspired to manipulate the price of gold and gold-related investment instruments in
violation of the Canadian Competition Act and common law.
Various regulators and competition and law enforcement authorities, including in the US and the EU, are conducting
investigations and reviews relating to HSBC’s precious metals operations. HSBC has been cooperating with these ongoing
investigations. In November 2014, the Antitrust Division and Criminal Fraud Section of the DoJ issued a document request to
HSBC Holdings, seeking the voluntary production of certain documents in connection with a criminal investigation that the DoJ
is conducting of alleged anti-competitive and manipulative conduct in precious metals trading. In January 2016, the Antitrust
Division of the DoJ informed HSBC that it was closing its investigation; however, the Criminal Fraud Section’s investigation
remains ongoing.
Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of these matters,
including the timing or any possible impact on HSBC, which could be significant.
Credit default swap regulatory investigation and litigation
In July 2013, HSBC received a Statement of Objections from the Commission relating to its ongoing investigation of alleged
anti-competitive activity by a number of banks and other market participants in the credit derivatives market between 2006
and 2009. The Statement of Objections sets out the Commission’s preliminary views and does not prejudge the final outcome
of its investigation. HSBC submitted a response and attended a hearing in May 2014. Following the hearing, the Commission
decided in December 2015 to close the case against all 13 banks, including all of the HSBC entities; however, the Commission’s
investigation relating to Markit and ISDA is ongoing.