HSBC MANAGEMENT (GUERNSEY) LIMITED

Allegations: IN DECEMBER 2016, THE EUROPEAN COMMISSION (THE 'COMMISSION') ISSUED A DECISION THAT IN EARLY 2007 HSBC, AMONG OTHER BANKS, COLLUDED ON EURO INTEREST RATE DERIVATIVE PRICING ELEMENTS, AND EXCHANGED RELATED SENSITIVEI NFORMATION, IN BREACH OF EU ANTITRUST RULES. THE COMMISSION DETERMINED THAT THE DURATION OF HSBC'S INFRINGEMENTWAS 1 MONTH AND FINED HSBC 33,606,000 EUROS. HSBC APPEALED THE DECISION TO THE GENERAL COURT OF THE EUROPEAN UNION, WHICH IN 2019 ANNULLED THE FINE FOR FAILURE TO PROVIDE REASONS, BUT UPHELD HSBC'S LIABILITY. IN 2021 THE EUROPEAN COMMISSION IMPOSED A REVISED FINE OF 31,700,000 EUROS (USD $37,802,250 WHICH UTILIZES THE CLOSING FX RATE AS OF THE DATE OF ISSUANCE FOR THE AMENDED FINE AND AS REFLECTED IN SECTION 12.A). HSBC APPEALED TO THE LIABILITY FINDINGS TO THE COURT OF JUSTICE OF THE EUROPEAN UNION, WHICH UPHELD HSBC'S LIABILITY IN JANUARY 2023. HSBC CONTINUES TO MAINTAIN AN APPEAL BEFORE THE GENERAL COURT AGAINST THE 2021 COMMISSION DECISION IMPOSING A REVISED FINE. IT SHOULD BE NOTED THAT BOTH HSBC (ON LIABILITY) AND THE COMMISSION (ON WHETHER IT ADEQUATELY EXPLAINED THE FINE QUANTUM) ARE APPEALING TO THE COURT OF JUSTICE OF THE EUROPEAN UNION.

Sanction: Civil and Administrative Penalt(ies) /Fine(s)

How it ended: Settled

Summary: HSBC PAID THE REVISED FINE OF 31,700,000 EUROS (USD $37,802,250 WHICH UTILIZES THE CLOSING FX RATE AS OF THE DATE OF ISSUANCE FOR THE AMENDED FINE AND AS REFLECTED IN SECTION 12.A) IN 2021. IN NOVEMBER 2024, THE GENERAL COURT DISMISSED HSBC'S APPEAL AGAINST THE FINE.

Resolved: Dec 7, 2016

Allegations: IN SEPTEMBER 2017, FOLLOWING THE CONCLUSION OF THE US FEDERAL RESERVE BOARD'S REVIEW OF THE EFFECTIVENESS OF HSBC'S FX PRACTICES DURING THE PERIOD OF OCTOBER 2008 THROUGH OCTOBER 2013, HSBC HOLDINGS PLC AND HSBC NORTH AMERICA HOLDINGS INC. ENTERED INTO A CONSENT ORDER REGARDING CERTAIN DEFICIENCIES IN HSBC'S CONTROL AND OVERSIGHT OVER ITS FX BUSINESS. HSBC THROUGH VARIOUS SUBSIDIARIES OF HOLDINGS, INCLUDING HBEU AND HBUS, LACKED ADEQUATE GOVERNANCE, RISK MANAGEMENT, COMPLIANCE AND AUDIT POLICIES AND PROCEDURES TO ENSURE THAT HSBC'S COVERED FX ACTIVITIES COMPLIED WITH SAFE AND SOUND BANKING PRACTICES AND APPLICABLE INTERNAL POLICIES. ON AUGUST 18, 2023, THE FEDERAL RESERVE BOARD CONCLUDED THAT HSBC WAS IN FULL COMPLIANCE AND TERMINATED THE CONSENT ORDER.

Sanction: Cease and Desist

How it ended: Consent

Summary: IN SEPTEMBER 2017, FOLLOWING THE CONCLUSION OF THE US FEDERAL RESERVE BOARD'S REVIEW OF THE EFFECTIVENESS OF HSBC'S FX PRACTICES DURING THE PERIOD OF OCTOBER 2008 THROUGH OCTOBER 2013, HSBC HOLDINGS PLC AND HSBC NORTH AMERICA HOLDINGS INC. ENTERED INTO A CONSENT ORDER REGARDING CERTAIN DEFICIENCIES IN HSBC'S CONTROL AND OVERSIGHT OVER ITS FX BUSINESS. HSBC THROUGH VARIOUS SUBSIDIARIES OF HOLDINGS, INCLUDING HBEU AND HBUS, LACKED ADEQUATE GOVERNANCE, RISK MANAGEMENT, COMPLIANCE AND AUDIT POLICIES AND PROCEDURES TO ENSURE THAT HSBC'S COVERED FX ACTIVITIES COMPLIED WITH SAFE AND SOUND BANKING PRACTICES AND APPLICABLE INTERNAL POLICIES. ON AUGUST 18, 2023, THE FEDERAL RESERVE BOARD CONCLUDED THAT HSBC WAS INFULL COMPLIANCE AND TERMINATED THE CONSENT ORDER.

Resolved: Aug 18, 2023

Allegations: IN JANUARY 2018, FOLLOWING THE CONCLUSION OF THE US DEPARTMENT OF JUSTICE'S (DOJ) INVESTIGATION INTO HSBC'S HISTORICAL FOREIGN EXCHANGE ACTIVITIES, HSBC HOLDINGS ENTERED INTO A THREE-YEAR DEFERRED PROSECUTION AGREEMENT WITH THE CRIMINAL DIVISION OF THE DOJ (THE FX DPA), REGARDING FRAUDULENT CONDUCT IN CONNECTION WITH TWO PARTICULAR TRANSACTIONS IN 2010 AND 2011. IN JANUARY 2021, THE FX DPA EXPIRED AND, IN AUGUST 2021, THE CHARGES DEFERRED BY THE FX DPA WERE DISMISSED.

Sanction: Civil and Administrative Penalt(ies) /Fine(s)

How it ended: Consent

Summary: ON JANUARY 18, 2018, THE U.S. DEPARTMENT OF JUSTICE (DOJ) ANNOUNCED THAT IT HAD ENTERED INTO A THREE-YEAR DEFERRED PROSECUTION AGREEMENT WITH HSBC HOLDINGS PLC TO RESOLVE THE DOJ'S INVESTIGATION INTO HSBC'S HISTORICAL FOREIGN EXCHANGE SALES AND TRADING ACTIVITIES WITHIN ITS GLOBAL MARKETS BUSINESS. THE AGREEMENT CONCERNS IMPROPER TRADING AND THE MISAPPROPRIATION OF CONFIDENTIAL CLIENT INFORMATION IN CONNECTION WITH TWO FOREIGN EXCHANGE TRANSACTIONS IN 2010 AND 2011.

Resolved: Aug 2, 2021

Allegations: THE EUROPEAN COMMISSION IN DECEMBER 2021 COMPLETED A CARTEL INVESTIGATION INTO THE FOREIGN EXCHANGE ('FOREX') SPOT TRADING MARKET BY IMPOSING FINES ON FIVE FINANCIAL INSTITUTIONS, INCLUDING HSBC HOLDINGS PLC. THE COMMISSION'S INVESTIGATION FOCUSED ON THE TRADING OF THE G10 CURRENCIES. THE COMMISSION'S INVESTIGATION REVEALED THAT SOME TRADERS IN CHARGE OF THE FOREX SPOT TRADING OF G10 CURRENCIES, ACTING ON BEHALF OF THE FINED BANKS, EXCHANGED SENSITIVE INFORMATION AND TRADING PLANS, AND OCCASIONALLY COORDINATED THEIR TRADING STRATEGIES THROUGH AN ONLINE PROFESSIONAL CHATROOM. THE COMMISSION FOUND THAT THESE INFORMATION EXCHANGES ENABLED THE TRADERS TOMAKE INFORMED MARKET DECISIONS ON WHETHER AND WHEN TO SELL OR BUY THE CURRENCIES THEY HAD IN THEIR PORTFOLIOS, AS OPPOSED TO A SITUATION WHERE TRADERS ACTING INDEPENDENTLY FROM EACH OTHER TAKE AN INHERENT RISK IN TAKING THESE DECISIONS. OCCASIONALLY, THESE INFORMATION EXCHANGES ALSO ALLOWED THE TRADERS TO IDENTIFY OPPORTUNITIES FOR COORDINATION, FOR EXAMPLE THROUGH A PRACTICE CALLED "STANDING DOWN", WHEREBY SOME OF THEM WOULD TEMPORARILY REFRAIN FROM TRADING TO AVOIDINTERFERING WITH ANOTHER TRADER. HSBC COOPERATED WITH THE INVESTIGATION AND HAS PAIDTHE FINE NOTED BELOW.

Sanction: Civil and Administrative Penalt(ies) /Fine(s)

How it ended: Settled

Summary: HSBC HOLDINGS CAUSED THE FINE TO BE PAID WITHIN IN THE TIMEFRAME DIRECTED BY THE COMMISSION.

Resolved: Dec 2, 2021

Allegations: IN MAY 2023 THE COMPETITION AND MARKETS AUTHORITY ISSUED A STATEMENT OF OBJECTIONS TO FIVE BANKS (DEUTSCHE BANK, MORGAN STANLEY, ROYAL BANK OF CANADA, CITI, AND HSBC). IN FEBRUARY 2025, THE COMPETITION AND MARKETS AUTHORITY ANNOUNCED THAT IT HAD REACHED A SETTLEMENT WITH HSBC. HSBC ACCEPTED THAT A SINGLE HSBC TRADER HAD SHARED COMPETITIVELY SENSITIVE INFORMATION ON 12 SEPARATE OCCASIONS WITH A DEUTSCHE BANK TRADER IN A ONE-TO-ONE CHATROOM FROM OCTOBER 2009 TO JULY 2010. THE INFORMATION CONCERNED THE ISSUING AND TRADING OF GILTS.

Sanction: Civil and Administrative Penalt(ies) /Fine(s)

How it ended: Settled

Summary: IN FEBRUARY 2025, HSBC HOLDINGS (AS PARENT) AND HSBC BANK PLC ACCEPTED THAT A SINGLE HSBC BANK PLC TRADER HAD SHARED COMPETITVELY-SENSITIVE INFORMATION WITH DEUTSCHE BANK ON 12 OCCASSIONS OVER 2009-2010. HSBC HAS AGREED TO PAY A FINE OF GBP £23.4M (APPROX USD $30M). No Information Filed

Resolved: Feb 21, 2025