HSBC 2015 Annual Report Download - page 454

Notes on the Financial Statements (continued)
40 – Legal proceedings and regulatory matters
HSBC HOLDINGS PLC
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limitations to proceed. Some of those plaintiffs appealed the New York District Court’s decision to the US Court of Appeals for
the Second Circuit, which later dismissed those appeals as premature. In January 2015, the US Supreme Court reversed the
Court of Appeals’ decision and remanded the case to the Court of Appeals for consideration on the merits of the plaintiffs’
appeal. Oral argument in the Court of Appeals was held in November 2015, and the parties are awaiting a decision.
Other plaintiffs sought to file amended complaints in the New York District Court to assert additional allegations. In June 2014,
the New York District Court issued a decision that, amongst other things, denied the plaintiffs’ request for leave to amend their
complaints to assert additional theories of Libor manipulation against HSBC and certain non-HSBC banks, but granted leave to
assert such manipulation claims against two other banks; and granted defendants’ motion to dismiss certain additional claims
under the CEA as barred by the applicable statute of limitations. Proceedings with respect to all other actions in the consolidated
proceedings were stayed pending this decision. The stay was lifted in September 2014, and amended complaints were filed in
certain other individual and class actions thereafter. The defendants filed motions to dismiss, and in August 2015 and
November 2015, the court issued decisions granting the motions in part, although it has not yet entered an order specifying
which particular claims are dismissed against which defendants.
Separately, HSBC and other panel banks have also been named as defendants in two putative class actions filed in the New
York District Court on behalf of persons who transacted in financial instruments allegedly related to the euroyen Tokyo
interbank offered rate (‘Tibor’) and/or Japanese yen Libor. The complaints allege, amongst other things, misconduct related to
euroyen Tibor, although HSBC is not a member of the Japanese Bankers Association’s euroyen Tibor panel, as well as Japanese
yen Libor, in violation of US antitrust laws, the CEA, and state law.
The first of the two actions was filed in April 2012, and HSBC responded by filing a motion to dismiss. In March 2014, the New
York District Court dismissed the plaintiffs’ claims under US antitrust law and state law, but sustained their claims under the
CEA. In June 2014, the plaintiffs then moved for leave to file an amended complaint adding new claims and parties. That
motion was denied in March 2015, except insofar as it granted leave to add certain defendants not affiliated with HSBC and
reserving on the question of whether the California State Teachers Retirement System (‘CALSTRS’) may intervene and be
added as a plaintiff. In October 2015, the New York District Court denied the motion of CALSTRS to intervene. In November
2015, CALSTRS filed an appeal of that ruling to the United States Court of Appeals for the Second Circuit, which remains
pending.
The second action was filed in July 2015. In February 2016, HSBC and the other banks named in the complaint filed a motion to
dismiss the action, and a decision on that motion is pending.
In November 2013, HSBC and other panel banks were also named as defendants in a putative class action filed in the New York
District Court on behalf of persons who transacted in euro futures contracts and other financial instruments allegedly related
to Euribor. The complaint alleges, amongst other things, misconduct related to Euribor in violation of US antitrust laws, the
CEA and state law. The court previously stayed proceedings until May 2015. After the stay expired, the plaintiffs filed an
amended complaint. In October 2015, HSBC filed a motion to dismiss the action, which remains pending.
In September and October 2014, HSBC Bank plc and other panel banks were named as defendants in a number of putative
class actions that were filed and consolidated in the New York District Court on behalf of persons who transacted in interest
rate derivatives or purchased or sold financial instruments that were either tied to US dollar International Swaps and
Derivatives Association fix (‘ISDAfix’) rates or were executed shortly before, during, or after the time of the daily ISDAfix setting
window. The complaint alleges, amongst other things, misconduct related to these activities in violation of US antitrust laws,
the CEA and state law. In February 2015, plaintiffs filed a second consolidated amended complaint replacing HSBC Bank plc
with HSBC Bank USA. A motion to dismiss that complaint was filed in April 2015, and a decision is pending.
There are many factors that may affect the range of possible outcomes, and the resulting financial impact, of these lawsuits.
Based upon the information currently available, it is possible that any liabilities that might arise as a result of the claims in
these actions could be significant.
Foreign exchange rate investigations and litigation
Various regulators and competition and law enforcement authorities around the world, including in the US, the EU, Brazil,
South Korea and elsewhere, are conducting investigations and reviews into trading by HSBC and others on the foreign
exchange markets. HSBC has been cooperating with these ongoing investigations and reviews.
In May 2015, the DoJ resolved its investigations with respect to five non-HSBC financial institutions, four of whom agreed to
plead guilty to criminal charges of conspiring to manipulate prices in the foreign exchange spot market, and resulting in the
imposition of criminal fines in the aggregate of more than $2.5bn. Additional penalties were imposed at the same time by the
FRB and other banking regulators. HSBC was not a party to these resolutions, and investigations into HSBC by the DoJ, FRB and
others around the world continue.
In addition, in late 2013 and early 2014, HSBC Holdings, HSBC Bank plc, HNAH and HSBC Bank USA were named as defendants,
amongst other banks, in various putative class actions filed in the New York District Court. In March 2014, the plaintiffs filed a
consolidated amended complaint alleging, amongst other things, that defendants conspired to manipulate the WM/Reuters
foreign exchange benchmark rates (the ‘Consolidated Action’). Separate putative class actions were also brought on behalf of
non-US plaintiffs (the ‘Foreign Actions’). Defendants moved to dismiss all actions. In January 2015, the court denied defendants’