HSBC unit fined $2M by FINRA over long-running disclosure lapses

HSBC Securities (USA) agreed to be censured and certify its compliance in reaching settlement, according to a FINRA disciplinary action published Monday.

The details: Between January 2013 and December 2021, HSBC published research reports containing approximately 275,000 disclosure inaccuracies about its conflicts of interest, FINRA alleged.

FINRA cited as an example when HSBC aggregated data for affiliated companies under a single name rather than individualized data for each client.

“As a result, the information in HSBC’s data feeds caused the disclosure of investment banking relationships, compensation sources, and other conflicts with subject companies when they did not exist,” FINRA stated.

HSBC allegedly did not establish and maintain a supervisory system, including written procedures, reasonably designed to achieve compliance with FINRA rules.

FINRA found HSBC had no procedures, testing, or other system to confirm the information in data feeds was accurate and complete. The firm allegedly did not confirm accuracy and completeness of its data feeds to any individuals or groups, thus preventing it from detecting deficiencies over nearly nine years.

Compliance considerations: HSBC agreed to certify its compliance with the settlement within 120 days by implementing a supervisory system, including written procedures, reasonably designed to achieve compliance with FINRA rules.

The self-regulatory organization noted in January 2013 it fined HSBC $250,000 for similar alleged violations. In December 2021, HSBC remediated the disclosure issues in its research reports.

Firm response: “HSBC is pleased to resolve this matter,” a firm spokesperson said in an emailed statement. “We have implemented solutions to address these issues and continue to invest and work to enhance our compliance procedures.”

The firm agreed to settle without admitting or denying FINRA’s findings.