Exhibit 99.1

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FINAL NOTICE  

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To:         HSBC Bank plc

Firm

Reference

Number:  114216

Address:  8 Canada Square, Canary Wharf, London, E14 5HQ

Date        11 November 2014

1. ACTION

2. SUMMARY OF REASONS

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¹ The daily average volume turnover of the global FX market was over USD5 trillion in April

2013 according to the Bank for International Settlements (BIS) Triennial Central Bank Survey

2013.

primarily upon its front office FX business to identify, assess and manage risks arising in that business. The front office failed adequately to discharge these responsibilities with regard to obvious risks associated with confidentiality, conflicts of interest and trading conduct. The right values and culture were not sufficiently embedded in HSBC’s G10 spot FX trading business, which resulted in it acting in HSBC’s own interests as described in this Notice without proper regard for the interests of its clients, other market participants or the wider UK financial system. The lack of proper control by HSBC over the activities of its G10 spot FX traders in London undermined market integrity and meant that misconduct went undetected for a number of years. HSBC’s control and risk functions failed to challenge effectively the management of these risks in the G10 spot FX trading business.

was not subject to enforcement action by the FCA for LIBOR / EURIBOR misconduct during the Relevant Period. It nonetheless engaged in an extensive remediation programme across its businesses in response to these Notices. This included enhancements to the governance and controls around submissions-based benchmarks and more widely. Despite these improvements, the steps taken during the Relevant Period in its G10 spot FX trading business did not adequately address the root causes that gave rise to failings described in this Notice.

2.10. The Authority acknowledges the significant co-operation and assistance provided by HSBC during the course of its investigation. HSBC is continuing to undertake remedial action and has committed significant resources to improving the business practices and associated controls relating to its FX operations. It has taken important steps to promote changes to culture and values across its business. The Authority recognises the work already undertaken by HSBC in this regard.

2.11. This Notice relates solely to HSBC’s conduct in its G10 spot FX trading business in London. It makes no criticism of any entities other than the firms engaged in misconduct as described in this Notice.

3. DEFINITIONS

3.1. The definitions below are used in this Final Notice.

“the Act” means the Financial Services and Markets Act 2000

“the Authority” means the body corporate previously known as the Financial Services Authority and renamed on 1 April 2013 as the Financial Conduct Authority

“the BoE” means the Bank of England

“the BIS survey” means the Bank for International Settlements (BIS) Triennial Central Bank Survey 2013

“CDSG” means the BoE’s Chief Dealers’ Sub-Group

“clients” means persons to whom a firm provides G10 spot FX voice trading services

“EURIBOR” means the Euro Interbank Offered Rate

“firms” means authorised persons as defined in section 31 of the Act

“FX” means foreign exchange

“G10 currencies” means the following currencies:

“LIBOR” means the London Interbank Offered Rate

“the ACI Model Code” means the Model Code issued by the ACI – the Financial Markets Association, as applicable during the Relevant Period

“net client orders” has the meaning given to that term at paragraph

3.2 of Annex B to this Notice

“the NIPS Code” means the Non-Investment Products Code, as applicable during the Relevant Period

“the Principles” means the Authority’s Principles for Businesses

“Reuters” means the Reuters Dealing 3000, an electronic broking

platform operated by Thomson Reuters

“the Relevant Period” means 1 January 2008 to 15 October 2013

“spot FX” has the meaning given to that term in paragraph 4.3 of this Notice

“the spot FX rate” means the current exchange rate at which a currency pair can be bought or sold

“the Tribunal” means the Upper Tribunal (Tax and Chancery Chamber)

“the UK financial system” means the financial system operating in the United Kingdom, including financial markets and exchanges, regulated activities and other activities connected with financial markets and exchanges

“4pm WM Reuters fix” or “WMR fix” is the exchange rate for various spot FX currency pairs determined by WM Reuters as at 4pm UK time

relative values of different currencies and are of crucial importance in worldwide financial markets. In particular, benchmarks such as the 4pm WM Reuters fix are used in the valuation and performance management of investment portfolios held by pension funds and asset managers both in the UK and globally. The rates established at these fixes are also used as reference rates in financial derivatives.

The 4pm WM Reuters fix

Fix orders

market just before or during the fix may cause the fix rate to move higher. This gives rise to a potential conflict of interest between a firm and its clients. It also creates a potential incentive for a firm to seek to manipulate the fix rate to its benefit and to the potential detriment of certain of its clients. For example, there is a risk that a firm with net client orders to buy a particular currency at the fix rate might deliberately trade in a manner designed to manipulate the fix rate higher. This trading could result in a profit for the firm as described above, but may result in certain clients paying a higher fix rate than they would otherwise have had to pay.

Fix Orders – The Bank of England

4.10. The Bank of England (“the BoE”) through its membership of the Chief Dealers’ Sub-Group (“CDSG”) ² was made aware during the Relevant Period of firms using electronic messaging services, such as chat rooms, to discuss their net orders ahead of fixes and the practice of netting off between them. For the avoidance of doubt, the Authority does not consider that the netting off of orders ahead of fixes is inappropriate in all circumstances. The Authority has concluded that the fact that netting off was discussed by the CDSG does not affect the liability of the firms. Each firm was responsible for ensuring that it had appropriate systems and controls to manage the risks associated with these practices. The BoE has conducted its own investigation into the role of its officials in relation to certain conduct issues in the FX market which is being published separately. ³

Stop loss orders

4.11. Clients place stop loss orders with a firm to help manage their risk arising from movements in currency rates in the spot FX market. By accepting these orders, the firm agrees to transact with the client at or around a specified rate if the currency trades at that rate in the market. No binding agreement is made until the agreed rate has been “triggered” (i.e. when the currency trades at that rate in the market).

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² The CDSG is a sub-group of the London Foreign Exchange Joint Standing Committee established under the auspices of the BoE. Its membership is drawn from a selection of chief dealers active in the London FX market and is chaired by a representative of the BoE.

3 The terms of reference of which are available at:

http://www.bankofengland.co.uk/publications/Pages/news/2014/052.aspx

4.12.  By agreeing to transact with a client at or around the specified rate, the firm is exposed to movements in the spot FX rate. A firm will typically buy or sell currency in the market in order to manage this risk. This trading can result in a profit or a loss for the firm. For example, a client’s stop loss order to buy currency can result in a profit for the firm if the average rate at which the firm buys the currency in the market is lower than the rate at which it sells the currency to the client pursuant to the stop loss order.

4.13.  A firm legitimately managing the risk arising from a client’s stop loss order may profit from the trading associated with its risk management. There is, however, a potential incentive for a firm to manipulate the spot FX rate in order to execute stop loss orders for the firm’s benefit and to the potential detriment of its client. For example, a firm with a client stop loss order to buy a particular currency might deliberately trade in a manner designed to manipulate the spot FX rate higher in order to trigger the client’s order at the specified rate. This could result in the firm making a profit as described above. The client could be disadvantaged, however, since the transaction may not have happened at that time or at all but for the firm’s actions.

Electronic messaging via chat rooms or similar

4.14.  It was common practice during most of the Relevant Period for G10 spot FX traders at firms to use electronic messaging services, such as chat rooms, to communicate with traders at other firms. Whilst such communications are not of themselves inappropriate, the frequent and significant flow of information between traders at different firms increases the potential risk of traders engaging in collusive activity and sharing, amongst other things, confidential information. It is therefore especially important that firms exercise appropriate control and monitoring of such communications.

Spot FX operations at HSBC

4.15.  HSBC is a wholly owned subsidiary of HSBC Holdings plc (“the HSBC group”). HSBC is a full service bank, headquartered in London, with operations in retail, wholesale and investment banking as well as other areas of the financial services sector.

4.16.  HSBC’s spot FX desk is part of the Global FX and Commodities business, a business line within Global Banking and Markets, one of HSBC group’s four global divisions. The HSBC group’s principal spot FX trading sites are London, New York and Hong Kong. According to the Euromoney ⁴ FX Survey 2013, the HSBC group was listed in the top seven firms in terms of market share in global FX trading in spot and forwards.

4.17.  HSBC operates a ”three lines of defence” model to manage risk. The first line of defence includes management, front office and support functions that are responsible and accountable for its day-to-day activities, management of risks and controls to mitigate the risks of the business. The second line of defence includes the global functions such as Risk and Compliance and is responsible for providing assurance, challenge and oversight of the activities of the first line of defence. The third line of defence is Internal Audit which provides independent assurance over the first and second lines of defence.

The failures of systems and controls at HSBC

4.18.  In accordance with Principle 3, HSBC was under an obligation to identify, assess and manage appropriately the risks associated with its G10 spot FX trading business, given the potentially very significant impact of misconduct in that business on G10 fix benchmarks, the spot FX market generally and the wider UK financial system. HSBC failed to do so adequately during the Relevant Period in relation to risks associated with confidentiality, conflicts of interest and trading conduct in its G10 spot FX trading business in London.

4.19.  There are no detailed requirements for systems and controls concerning spot FX trading in the Authority’s Handbook. The importance of firms implementing effective systems and controls to manage risks associated with their spot FX businesses was nonetheless recognised within the market, as evidenced by a number of industry codes published from time to time from 1975 onwards.

4.20.  The codes applicable during the Relevant Period expressly recognised:

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⁴ Euromoney is an English-language monthly magazine focused on business and finance. First published in 1969, it covers global banking, macroeconomics and capital markets, including debt and equity.

Failure adequately to identify, assess and manage risks in HSBC’s

G10 spot FX trading business

4.22.  HSBC failed to identify properly or take adequate steps to assess the risks described in this Notice associated with its G10 spot FX trading business, and to manage them effectively during the Relevant Period.

4.23. HSBC’s G10 spot FX trading business involved traders receiving confidential information regarding, amongst other things, the size and direction of its clients’ fix orders and the size, direction and level of other client orders, including stop loss orders. Whilst receipt and use of such information for risk management purposes can be legitimate, there is a risk that the information could be improperly used by those traders to trade for HSBC’s benefit and to the disadvantage of certain of its clients. If disclosed by HSBC to traders at other firms, it could also enable those traders improperly to take

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5 Paragraph 1 of Annex C

6 Paragraph 1 of Annex C

7 Paragraph 1 and 2.1 of Annex C

8 Paragraph 1 of Annex C

9 Paragraph 2.2 of Annex C

advantage of this information for their firms’ benefit and to the potential detriment of certain of HSBC’s clients, acting either alone or in collusion with G10 spot FX traders at HSBC. This gave rise to obvious risks in HSBC’s G10 spot FX trading business concerning conflicts of interest, confidentiality and trading conduct. These risks were exacerbated, prior to December 2012, by the widespread use by HSBC’s G10 spot FX traders of chat rooms to communicate with traders at other firms.

4.24.  Pursuant to its three lines of defence model, HSBC’s front office had primary responsibility for identifying, assessing and managing the risks associated with its G10 spot FX trading business. The front office failed adequately to discharge these responsibilities with regard to the risks described in this Notice. The right values and culture were not sufficiently embedded in HSBC’s G10 spot FX trading business, which resulted in it acting in HSBC’s own interests as described in this Notice, without proper regard for the interests of its clients, other market participants or the wider UK financial system. The lack of proper controls by HSBC over the activities of its G10 spot FX traders meant that misconduct went undetected for a number of years. Certain of those responsible for managing front office matters were aware of and/or at times involved in the misconduct.

4.25.  Whilst HSBC had policies in place regarding risks of the type described in this Notice, they were high-level in nature and applied generally across a number of HSBC’s business divisions. For example, HSBC’s FX Desk Instruction Manuals did not adequately address the behaviours described in this Notice, but generally referred readers back to the broader cross-divisional policies referred to above. In addition, HSBC had policies in place regarding the use of electronic communications, but they were not sufficiently specific to the use of chat rooms during the Relevant Period.

4.26.  HSBC failed to take adequate steps to ensure that general policies concerning confidentiality, conflicts of interest and trading conduct were effectively implemented in its G10 spot FX trading business. There was insufficient training and guidance on how these policies should be applied specifically to that business. They contained few practical examples about their application and inadequate guidance on what amounted to unacceptable behaviour by G10 spot FX

traders. HSBC did take steps to enhance the training it delivered regarding the appropriate content of electronic communications. However, the absence of adequate training and guidance about the application of HSBC’s general policies to its G10 spot FX trading business increased the risk that misconduct would occur.

4.27.  HSBC’s day-to-day oversight of its G10 spot FX traders’ conduct was insufficient. There was no formal front office supervision by HSBC of those traders’ conduct and use of chat rooms or similar communications during the Relevant Period. None of the systems and controls in HSBC’s FX business were adequate to detect and prevent the behaviours described in this Notice.

4.28.  HSBC’s second and third lines of defence failed to challenge effectively the management of these risks by HSBC’s front office. From February 2011, HSBC introduced regular monitoring of chat rooms, but it failed to detect the behaviours described in this Notice. From December 2012, HSBC verbally banned traders from using multi-bank chat rooms.

4.29.  HSBC had certain G10 spot FX trade monitoring in place in London during the Relevant Period, which was not designed to identify the trading behaviours described in this Notice.

4.30. For the reasons set out above, despite certain significant improvements made to HSBC’s controls relating to its G10 spot FX trading business, HSBC nonetheless failed during the Relevant Period to address or manage sufficiently the risks in that business. These failings were especially serious given that:

Inappropriate trading behaviour and misuse of confidential information

4.31.  HSBC’s failure to identify, assess and manage appropriately the risks in its G10 spot FX trading business allowed the following behaviours to occur in that business:

4.32.  These behaviours were typically facilitated by means of G10 spot FX traders at different firms communicating via electronic messaging services (including chat rooms). These traders formed close, tight- knit groups or one-to-one relationships based upon mutual benefit and often with a focus on particular currency pairs. Entry into some of these groups or relationships and the chat rooms used by them was closely controlled by the participants. One HSBC trader referred to the fact that in larger chat rooms “people choke up, sacred [scared] to give info” . Certain groups described themselves or were described by others using phrases such as “A-team” or similar.

4.33.  The value of the information exchanged between the traders and the importance of keeping it confidential between recipients was clear to participants. An HSBC trader within one group complained in a chat room about another trader in the group not disclosing a large net order to him in advance of a fix: “u are uselees [useless] … how can I make free money with no fcking heads up” .

Attempts to manipulate the fix

4.34.  During its investigation, the Authority identified examples within HSBC’s G10 spot FX trading business of attempts to manipulate fix

rates alone or in collusion with other firms in the manner described in this Notice.

4.35.  The traders involved disclosed and received confidential information to and from traders at other firms regarding the size and direction of their firms’ net orders at a forthcoming fix. The disclosures provided these traders with more information than they would otherwise have had about other firms’ client order flows and thus the likely direction of the fix.

4.36. These traders used this information to determine their trading strategies and depending on the circumstances to attempt to manipulate the fix in the desired direction. They did this by undertaking a number of actions, typically including one or more of the following (which would depend on the information disclosed and the traders involved):

(1)    Traders in a chat room with net orders in the opposite direction to the desired movement at the fix sought before the fix to transact or “net off” their orders with third parties outside the chat room, rather than with other traders in the chat room. This maintained the volume of orders in the desired direction held by traders in the chat room and avoided orders being transacted in the opposite direction at the fix. Traders within the market have referred to this process as “leaving you with the ammo” or similar.

(2)     Traders in a chat room with net orders in the same direction as the desired rate movement at the fix sought before the fix to do one or more of the following:

(a)   Net off these orders with third parties outside the chat room, thereby reducing the volume of orders held by third parties that might otherwise be transacted at the fix in the opposite direction. Traders within the market have referred to this process as “taking out the filth” or “clearing the decks” or similar;

(b)   Transfer these orders to a single trader in the chat room, thereby consolidating these orders in the hands of one trader. This potentially increased the likelihood of successfully manipulating the fix rate since that trader

could exercise greater control over his trading strategy during the fix than a number of traders acting separately. Traders within the market have referred to this as “giving you the ammo” or similar; and/or

(c)   Transact with third parties outside the chat room in order to increase the volume of orders held by them in the desired direction. This potentially increased the influence of the trader(s) at the fix by allowing them to control a larger proportion of the overall volume traded at the fix than they would otherwise have and/or to adopt particular trading strategies, such as trading a large volume of a currency pair aggressively. This process was known as “building” .

4.37.  The effect of these actions was to increase the influence that those traders had with regard to the forthcoming fix and therefore the likelihood of them being able to manipulate the rate in the desired direction. The trader(s) concerned then traded in an attempt to move the fix rate in the desired direction.

Example of HSBC’s attempts to manipulate the fix

4.38.  An example of HSBC’s involvement in this behaviour occurred on one day within the Relevant Period when HSBC attempted to manipulate the WMR fix in the GBP/USD currency pair. On this day, HSBC had net client sell orders at the fix which meant that it would benefit if it was able to move the WMR fix rate lower. ¹⁰ The chances of successfully manipulating the fix rate in this manner would be improved if HSBC and other firms adopted trading strategies based upon the information they shared with each other about their net orders.

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¹⁰ HSBC would profit if the average rate at which it sold GBP/USD in the market was higher than the fix rate at which it bought GBP/USD.

4.39.  In the period between 2:50pm and 3:44pm on this day, traders at four different firms (including HSBC) inappropriately disclosed to each other via chat rooms details of their net orders in respect of the forthcoming 4pm WMR fix in order to determine their trading strategies. The other three firms are referred to in this Final Notice as Firms A, B and C, as well as two other firms as Firms D and E. HSBC participated in a series of actions described below in an attempt to manipulate the fix rate lower.

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¹¹ The quotes used in this Notice reproduce the exact typography of the traders.

4.41.   In the first five seconds of the fix window, HSBC entered a further nine offers to sell GBP101 million. During the first five seconds, the

bid rate fell from 1.6009 to 1.6000. HSBC continued to enter offers throughout the remainder of the fix window and the bid rate fluctuated between 1.6000 and 1.6005.

4.42.  HSBC sold GBP311 million during the fix window on Reuters and other trading platforms. The amount it sold on Reuters accounted for 51% of the volume sold in the GBP/USD currency pair on the Reuters platform during the fix window. Cumulatively HSBC and Firms A to C accounted for 63% of selling during the fix window. Subsequently, WM Reuters published the 4pm fix rate for GBP/USD at 1.6003.

4.43.  The information disclosed between HSBC and Firms A, B and C, regarding their order flows was used to determine their trading strategies. The consequent trading by HSBC during the fix window was designed to decrease the WMR fix rate to HSBC’s benefit. HSBC’s trading in GBP/USD in this example generated a profit of approximately USD162,000.

4.44.  Subsequent to the fix, traders in the chat rooms congratulated one another by saying: “ nice work gents…I don my hat”, “Hooray nice team work” , “bravo…cudnt been better” and “have that my son…v nice mate” and “dont mess with our ccy [currency] ” . One of the traders commented “ there you go … go early, move it, hold it, push it ”. HSBC stated “ loved that mate… worked lovely… pity we couldn’t get it below the 00 ” ¹² and “we need a few more of those for me to get back on track this month”.

Attempts to trigger client stop loss orders

4.45.  During its investigation, the Authority identified instances within HSBC’s G10 spot FX trading business of attempts to trigger client stop loss orders. These attempts involved inappropriate disclosures to traders at other firms concerning details of the size, direction and level of client stop loss orders. The traders involved would trade in a manner aimed at manipulating the spot FX rate, such that the stop loss order was triggered. HSBC would potentially profit from this activity because if successful it would, for example, have sold the particular currency to its client pursuant to the stop loss order at a higher rate than it had bought that currency in the market.

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¹² The FCA considers that “00” is a reference to the rate of GBP/USD i.e.1.6000.

4.46. This behaviour was reflected in language used by G10 spot FX traders at HSBC in chat rooms. For example, an HSBC trader in a chat room referred to “going to go for broke at this stop… it is either going to end in massive glory or tears” . On another occasion, the same trader refers in a chat room to the fact he is “just about to slam some stops” . When asked by a colleague whether a particular client’s stop loss orders were “a pain for you guys” , another HSBC trader replied “nah love them … free money” and “we love the orders … always make money on them” .

Inappropriate sharing of confidential information

4.47. The attempts to manipulate the WMR fix and trigger client stop loss orders described in this Notice involved inappropriate disclosures of client order flows at fixes and details of client stop loss orders.

4.48. There are also examples in HSBC’s G10 spot FX trading business of disclosures of specific client identities to traders at other firms during the Relevant Period. These examples involved traders within that business using informal and sometimes derogatory code words to communicate details of clients’ activities without mentioning the clients by name. Disclosing these details gave traders at other firms notice of the activity of HSBC’s clients. This gave those traders more information about those clients’ activities than they would otherwise have had. The clients identified were typically significant market participants, such as central banks, large corporates, pension funds or hedge funds, whose trading activity was potentially influential in the market. When these disclosures were made while the client’s activity was ongoing, there was significant potential for client detriment.

5. FAILINGS

6. SANCTION

(1) HSBC’s breach of Principle 3 prior to 6 March 2010; and

(2) HSBC’s breach of Principle 3 on or after 6 March 2010.

Manner of and time for Payment

If the financial penalty is not paid

Publicity

Authority contacts

Therese Chambers

Project Sponsor

Financial Conduct Authority

Enforcement and Financial Crime Division

ANNEX A

RELEVANT STATUTORY AND REGULATORY PROVISIONS

1. RELEVANT STATUTORY PROVISIONS

1.1.    The Authority’s statutory objectives, set out in section 1B(3) of the

Act, include the integrity objective.

1.2.     Section 206(1) of the Act provides:

“If the Authority considers that an authorised person has contravened a requirement imposed on him by or under this Act… it may impose on him a penalty, in respect of the contravention, of such amount as it considers appropriate."

DEPP

The Enforcement Guide

ANNEX B

BACKGROUND INFORMATION TO THE SPOT FX MARKET

1. SPOT FX TRANSACTIONS

2. THE 4PM WM REUTERS FIX

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¹³ The methodology used by WM Reuters to calculate its rates is set out in the attached link:

http://www.wmcompany.com/pdfs/WMReutersMethodology.pdf

3. FIX ORDERS

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¹⁴ This can be done by “netting off” opposing orders in the same currency pairs or by splitting the order between its constituent currencies and “netting off” against orders relating to other currency pairs.

15 The first currency of a currency pair (e.g. EUR in the above example) is called the “base” currency. The second currency is called the “quote” currency (e.g. USD in the above example). An order to buy a currency pair is an order to buy the base currency (e.g. EUR) using the quote currency (e.g. USD) as consideration for the transaction. An order to sell a currency pair is an order to sell the base currency and to receive the quote currency.

4. STOP LOSS ORDERS

5. ELECTRONIC MESSAGING VIA CHAT ROOMS OR SIMILAR

ANNEX C

RELEVANT CODES OF CONDUCT

“ The handling of customer orders requires standards that strive for best execution for the customer in accordance with such orders subject to market conditions. In particular, caution should be taken so that customers’ interests are not exploited when financial intermediaries trade for their own accounts… Manipulative practices by banks with each other or with clients constitute unacceptable trading behaviour .” ¹⁶

The 2001 statement continues, “Foreign exchange trading management should prohibit the deliberate exploitation of electronic dealing systems to generate artificial price behaviour.” ¹⁷

2.       The NIPS Code provided the following relevant guidance:

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¹⁶ Annex 2 to the NIPS Code, November 2011. Original statement issued 22 February 2001 by

16 leading intermediaries in the FX market. Also Annex 2 to the NIPS Code December 2007 and

NIPS Code April 2009.

¹⁷ Ibid.

¹⁸ Paragraph 5, Part II, NIPS Code, December 2007; and paragraph 6, Chapter II, NIPS Code, April 2009 and November 2011.

19 Paragraph 16, Part III, NIPS Code, December 2007; and paragraph 15, Chapter III, NIPS Code, April 2009 and November 2011.

disclose or discuss, any information relating to specific deals which have been transacted, or are in the process of being arranged, except to or with the parties directly involved (and, if necessary, their advisers) or where this is required by law or to comply with the requirements of a supervisory body. All relevant personnel should be made aware of, and observe, this fundamental principle.” ²⁰

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²⁰ Paragraph 16, Part III, NIPS Code, December 2007; and paragraph 15, Chapter III, NIPS Code, April 2009 and November 2011.

²¹ Paragraphs 9 and 6, Chapter II, ACI Model Code, April 2009; paragraph 10, ACI Model Code, September 2012; paragraph 10.1 ACI Model Code, January 2013.

²² Paragraph 9, Chapter II, ACI Model Code, April 2009; paragraph 10(b), ACI Model Code, September 2012; and paragraph 10.2, ACI Model Code, January 2013.

ANNEX D
PENALTY ANALYSIS

Deterrence – DEPP 6.5.2G(1)

The nature, seriousness and impact of the breach – DEPP 6.5.2G(2)

information and attempts to manipulate the 4pm WM Reuters fix and to trigger client stop loss orders. In addition, certain of those responsible for managing front office matters were aware of and at times involved in behaviours described in this Notice in the period from 1 January 2008 to 5 March 2010. HSBC’s breach undermines confidence not only in the spot FX market, but also in the wider UK financial system.

The size and financial resources of the Firm – DEPP 6.5.2G(5)

Disciplinary record and compliance history – DEPP 6.5.2G(9)

Other action taken by the Authority – DEPP 6.5.2G(10)

Step 1: Disgorgement

Step 2: The seriousness of the breach

Level 1 – 0%

Level 2 – 5%

Level 3 – 10%

Level 4 – 15%

Level 5 – 20%

Impact of the breach

Nature of the breach

Whether the breach was deliberate or reckless

Step 3: Mitigating and aggravating factors

Step 4: Adjustment for deterrence

5.14.  If the Authority considers the figure arrived at after Step 3 is insufficient to deter the firm who committed the breach, or others, from committing further or similar breaches, then the Authority may increase the penalty.

5.15.  The Authority does not consider that the Step 3 figure of £15,840,000 represents a sufficient deterrent in the circumstances of this case.

5.16.  One of the Authority’s stated objectives when introducing the penalty policy on 6 March 2010 was to increase the level of penalties to ensure credible deterrence. The Authority considers that penalties imposed under this policy should be materially higher than penalties for similar breaches imposed pursuant to the policy applicable before that date.

5.17.  The failings described in this Notice allowed HSBC’s G10 spot FX trading business to act in the firm’s own interests without proper regard for the interests of its clients, other market participants or the financial markets as a whole. HSBC’s failure to control properly the activities of that business in a systemically important market such as the G10 spot FX market undermines confidence in the UK financial system and puts its integrity at risk. The Authority regards these as matters of the utmost importance when considering the need for credible deterrence.

5.18. HSBC’s response to misconduct identified in well-publicised enforcement actions against other firms relating to LIBOR / EURIBOR failed adequately to address in its G10 spot FX business the root causes that gave rise to failings described in this Notice. This indicates that industry standards have not sufficiently improved in relation to identifying, assessing and managing appropriately the risks that firms pose to markets in which they operate. The largest penalty imposed to date in relation to similar failings in the context of LIBOR / EURIBOR was a penalty against a firm of £200,000,000 (before settlement discount) under the Authority’s penalty policy prior to 6 March 2010. The Authority considers that the penalty imposed for the failings in this Notice should as a minimum significantly exceed that level for credible deterrence purposes.

5.19.  The Authority considers that in order to achieve credible deterrence, the Step 3 figure should be increased by the sum of £225,000,000.

5.20. Step 4 is therefore £240,840,000.

Step 5: Settlement discount

5.21.  If the Authority and HSBC, on whom a penalty is to be imposed, agree the amount of the financial penalty and other terms, DEPP 6.7 provides that the amount of the financial penalty which might otherwise have been payable will be reduced to reflect the stage at which the Authority and HSBC reached agreement. The settlement discount does not apply to the disgorgement of any benefit calculated at Step 1.

5.22. The Authority and HSBC reached agreement at Stage 1 and so a 30%

discount applies to the Step 4 figure.

5.23. Step 5 is therefore £168,588,000.

6. CONCLUSION

6.1. The Authority therefore imposes a total financial penalty of £216,363,000 on HSBC comprising:

Exhibit 99.2  

UNITED STATES OF AMERICA

Before the

COMMODITY FUTURES TRADING COMMISSION

ORDER INSTITUTING PROCEEDINGS PURSUANT TO SECTIONS 6(c)(4)(A) AND 6(d) OF THE COMMODITY EXCHANGE ACT, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS

I.

The Commodity Futures Trading Commission (“Commission”) has reason to believe that HSBC Bank plc (“Respondent” or “HSBC”) has violated the Commodity Exchange Act (the “Act”) and Commission Regulations (“Regulations”). Therefore, the Commission deems it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted to determine whether Respondent engaged in the violations set forth herein, and to determine whether any order shall be issued imposing remedial sanctions.

II.

In anticipation of the institution of an administrative proceeding, Respondent has submitted an Offer of Settlement (“Offer”), which the Commission has determined to accept. Without admitting or denying the findings or conclusions herein, Respondent herein consents to the entry, and acknowledges service of, this Order Instituting Proceedings Pursuant to Sections 6(c)(4)(A) and 6(d) of the Commodity Exchange Act, Making Findings, and Imposing Remedial Sanctions (“Order”). ¹

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¹ Respondent consents to the entry of this Order and to the use of these findings in this proceeding and in any other proceeding brought by the Commission or to which the Commission is a party; provided, however, that Respondent does not consent to the use of the Offer , or the findings or conclusions in this Order, as the sole basis for any other proceeding brought by the Commission, other than in a proceeding in bankruptcy or to enforce the terms of this Order. Nor does Respondent consent to the use of the Offer or this Order, or the findings or conclusions in this Order consented to in the Offer, by any other party in any other proceeding. Neither the Offer nor the Order confers any rights to any party other than the Commission and HSBC.

III.

The Commission finds the following:

A. Summary

From 2009 through mid-2012 (“Relevant Period”), HSBC, by and through certain foreign exchange desk traders (“FX traders”), at times, sought to benefit its own trading positions or

those of certain FX traders at other banks by attempting to manipulate, and aiding and abetting other banks in their attempts to manipulate certain FX benchmark rates, principally the World Market/Reuters Closing Spot Rates (“WM/R Rates”).

The WM/R Rates are the most widely referenced FX benchmark rates in the United States and globally. The WM/R Rates are used to establish the relative values of different currencies, and reflect the rates at which one currency is exchanged for another currency. Most of the WM/R Rates at issue here are set or fixed based on trading activity of market participants, including HSBC and other banks, at various times throughout the day. The most widely used WM/R Rate is set or fixed at 4 p.m. London time (“4 p.m.WM/R fix”).

FX benchmark rates, including the WM/R Rates, are used to price a variety of transactions including foreign exchange swaps, cross currency swaps, spot transactions, forwards, options, futures, and other financial derivative instruments. The most actively traded currency pairs are the Euro/U.S. Dollar (EUR/USD), U.S. Dollar/Japanese Yen (USD/YEN), and British Pound Sterling/U.S. Dollar (GBP/USD). Accordingly, the integrity of the WM/R Rates and other FX benchmark rates is critical to the integrity of the markets in the United States and around the world.

At times, during the Relevant Period, certain FX traders at HSBC coordinated their trading with FX traders at other banks to attempt to manipulate certain FX benchmark rates, including the 4 p.m. WM/R fix, to their benefit. These FX traders at HSBC and other banks used private electronic chat rooms to communicate and plan their attempts to manipulate the FX benchmark rates for certain currency pairs. ² Certain FX traders at HSBC regularly participated in numerous private chat rooms. At times, in certain chat rooms, HSBC FX traders disclosed confidential customer order information and trading positions, altered trading positions to accommodate the interests of the collective group, and agreed on trading strategies as part of an effort by the group to attempt to manipulate certain FX benchmark rates, in some cases downward and in some cases upward.

HSBC FX traders’ attempts to manipulate certain FX benchmark rates related principally to the GBP/USD currency pair. The wrongful conduct involved primarily two traders on the London G10 FX trading desk. This conduct occurred at times over the course of the Relevant Period without detection by HSBC, in part, because of internal controls and supervisory failures

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² Some FX traders involved in certain chat rooms at issue herein were responsible for managing their re-spective banks’ FX desks.

at HSBC. HSBC failed to adequately assess the risks associated with its participation in the fixing of WM/R benchmark rates and certain other FX benchmark rates. HSBC also lacked adequate internal controls or procedures to detect and deter possible misconduct involving certain FX benchmark rates and failed to adequately supervise its FX traders by, among other shortcomings, failing to have adequate controls and monitoring over the use of electronic chat rooms.

The Commission notes that some of this conduct occurred during the same period that HSBC was on notice that the CFTC and other regulators were investigating attempts by certain banks to manipulate the London Interbank Offered Rate (“LIBOR”) and other interest rate benchmarks.

***

In accepting HSBC’s Offer, the Commission recognizes the Respondent’s significant cooperation during the CFTC’s Division of Enforcement’s (“Division”) investigation of this matter, which included providing important information and analysis to the Division that helped the Division efficiently and effectively undertake its investigation. In addition, the Commission acknowledges that HSBC initiated its own internal investigation into FX trading prior to the Division’s investigation. The Commission also recognizes that HSBC has commenced significant remedial action to strengthen the internal controls and policies relating to foreign exchange benchmarks and internal and external communications by HSBC employees.

B. Respondent

HSBC Bank plc is a wholly owned subsidiary of HSBC Holdings plc (“the HSBC group”). HSBC is a full service bank, headquartered in London, with operations in four business segments: Retail Banking and Wealth Management; Commercial Banking; Global Banking and Markets; and Global Private Banking. HSBC’s London G10 FX trading desk is part of the Global FX and Commodities business, a business line within Global Banking and Markets.

C. Facts

1. The Foreign Exchange Market

The foreign exchange (“FX”) market, in which traders are able to buy, sell, exchange, and speculate on currencies, is one of the world’s largest and most actively traded financial markets. According to the Bank of International Settlements (“BIS”), trading in global foreign exchange markets averaged $5.3 trillion per day in April 2013. Currencies are traded in pairs and the transacted rate represents the rate to exchange one currency for another currency. The U.S. Dollar is the dominant currency in the FX market. The exchange of the U.S. Dollar for another currency accounts for an estimated 87% of global FX market activity. The most actively traded currency pairs are the Euro/U.S. Dollar (EUR/USD), U.S. Dollar/Japanese Yen (USD/YEN), and British Pound Sterling/U.S. Dollar (GBP/USD). Participants in the FX market include banks, investment firms, commercial companies, central banks, hedge funds, and retail customers. The FX market is comprised of many instruments including spot, forwards, swaps, futures, and option contracts.

2. WM/R Rates Overview

The WM/R Rates, one of the leading and most widely referenced FX benchmark rates, are calculated multiple times daily, including at 4 p.m. London time, which is commonly referred to as the “4 p.m. fix.” ³ For twenty-one of the most liquid currencies (the “trade currencies”), the 4 p.m. fix is based on actual trades, using bids and offers extracted from a certain electronic trading system during a one minute window (“fix period”). WM/Reuters determines the bid and offer rates based on the captured transacted rate and the bid-offer spread. WM/Reuters then calculates the median of these bid and offer rates and from these medians determines a “mid trade rate.” If there are not enough trades, WM/Reuters calculates a “mid order rate.” All orders and transactions are weighted equally, regardless of their notional sizes.

The WM/R Rates for the other 139 less liquid currencies (the “non-trade currencies”) are set by similar methodology. Because these currencies are less liquid, WM/Reuters relies on indicative quotes (submissions) derived from a Reuters computer feed that solicits “indications of interest” from market participants as part of its fixing methodology. WM/Reuters captures independent snapshots of indicative quotes for bids and offers, and selects the median rate from these quotes as the 4 p.m. WM/R fix.

WM/Reuters also provides fix rates for forward and non-deliverable forward contracts using methodology similar to that used for non-trade currencies. Fix rates for forward and non- deliverable forward contracts are published using a premium or discount to the spot rate for the relevant currency pair.

Other FX benchmark rates are also priced through the use of indicative rates. For instance, the Russian Ruble/U.S. Dollar Emerging Markets Trade Association (“EMTA”) benchmark rates are based on indicative rates submitted by market participants to the Chicago Mercantile Exchange (“CME”), which takes the midpoint of submitted bid offer pairs that it randomly selects, discards the highest and lowest midpoints, and calculates the final benchmark rate using the mean of the remaining midpoints.

FX futures contracts are connected to FX benchmark rates. The CME Russian Ruble/U.S. Dollar (RUB/USD) futures contract, for instance, is a cash settled futures contract for which the final settlement rate, a component of the contract’s price, is equal to the reciprocal of the EMTA Russian Ruble/U.S. Dollar benchmark rate. Exchange rates in many actively traded CME FX futures contracts, including the Euro/U.S. Dollar (EUR/USD) futures, the U.S. Dollar/Japanese Yen (USD/JPY) futures, and British Pound Sterling/U.S. Dollar (GBP/USD) futures, track rates in spot FX markets at near parity after adjusting for the forward differential, or adding or subtracting “forward points.” Speculative traders employ strategies that seek to capture short-lived arbitrage opportunities between FX futures and spot contracts. Since 2012,

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³ Another important benchmark is the European Central Bank (“ECB”) rate set by the ECB at 1:15 p.m. London time. Though less widely referenced than the WM/R Rate, the ECB Rates are also used by a wide range of participants, specifically non-financial corporates, and are important for the non-deliverable forwards market. See Financial Stability Board Foreign Exchange Benchmarks Final Report at 1 (September 30, 2014).

the CME provides clearing and other services for cash-settled Over the Counter FX Spot, Forward, Swaps, and Non-Deliverable Forward (NDF) contracts. The contracts cover 26 currency pairs, including EUR/USD, USD/JPY, and GBP/USD, and are cash-settled based on the 4 p.m. WM/R fix.

In late 2008, following the financial crisis, liquidity and volume in the FX market increased as many financial institutions and other market participants sought to exchange currencies. The increase in volume and liquidity allowed HSBC FX traders and traders at other banks to take advantage of this trading opportunity, specifically during the FX benchmark rate fixing periods.

During the Relevant Period, certain FX traders on HSBC’s London G10 FX trading desk had and/or developed relationships with certain FX traders at other banks, and they increasingly used private chat rooms to communicate and share information with each other. Certain FX traders at HSBC routinely participated in the chat rooms. Often, these FX traders had multiple chat rooms open simultaneously on their trading terminals, and within a chat, the traders often focused on a particular currency pair. Being a member of certain chat rooms was sometimes exclusive and by invitation only.

These chat rooms were the vehicles through which certain HSBC FX traders, primarily on the London G10 FX trading desk, and traders at other banks sought to benefit their own trading positions by jointly attempting to manipulate certain FX benchmark rates, including the 4 p.m. WM/R fix. Certain chat room participants used code words to evade detection by their banks’ compliance monitoring systems.

At times, during the Relevant Period, in their attempts to manipulate certain FX benchmark rates, principally the WM/R Rates (up or down), HSBC FX traders exchanged the size and direction of the Bank’s net orders with FX traders at other banks and used this information to attempt to coordinate trading strategies. The traders then used this information to enable one or more traders to attempt to manipulate the FX benchmark rates, particularly the 4 p.m. WM/R fix, prior to and during the relevant fixing period. This conduct at HSBC involved principally two traderson HSBC’s London G10 FX trading desk.

For example, in one of the chat rooms, if a trader determined that he had fix orders in the opposite direction to the chat room group’s overall net fixing position as they approached the fixing window, that trader may have transacted before the fix period with traders outside the private chat room, a practice known by market participants as “netting off,” rather than transact with other traders within the chat room. ⁴ In certain cases, the goal of this trading strategy was to maintain the volume of orders held by chat room members in the direction favored by the

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⁴ The Commission does not consider that the netting off of orders (or the decision not to net off) ahead of fixes is inappropriate in all circumstances.

majority of the private chat room members and limit orders being executed in the opposite direction during the fix window.

If traders in the chat room had net orders in the same direction as what they desired the rate movement at the fix to be, then the traders would at times either (1) match off these orders with traders outside of the chat room in an attempt to reduce the volume of orders in the opposite direction transacted during the fix period; (2) transfer their orders to a single trader within the chat room who could then execute a single order during the fix period; or (3) transact with traders outside of the chat room to increase the volume traded by chat room members during the fix window in the direction favored by the private chat room traders. At times, traders also increased the volume traded by them at the fix in the direction favored by the chat room traders in excess of the volume necessary to manage the risk associated with their bank’s net buy or sell orders at the fix. At times, these actions were undertaken in order to attempt to manipulate the benchmark rate set during the fix period.

For example, on one day during the Relevant Period, in a chat room ⁵ in which a trader on HSBC’s London G10 FX trading desk (“HSBC Trader”) and three traders at other banks or investment firms participated, the traders engaged in the following series of chats:

At 2:50 pm, the HSBC trader and a trader at Bank W disclose in the chat room that they are net sellers (“lhs”) in cable: ⁶

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⁵ The communications quoted in this Order contain shorthand trader language and many typographical errors. The shorthand and errors are explained in brackets within the quotations only when deemed necessary to assist with understanding the discussion.

⁶ The GBP/USD currency pairing is routinely referred to by traders as “cable.” When a FX trader has orders to sell GBP, it is often referred to as being on the left-hand side or “lhs” ( i.e ., GBP is listed on the left hand side of the GBP/USD currency pair). If a FX trader references right hand side or “rhs,” it indicates that the FX trader is a buyer of GBP (seller of USD) ( i.e ., USD is listed on the right hand side of the GBP/USD currency pair).

As the 4 p.m. fix period closes, the participants in the chat room made the following statements:

Simultaneously, in a separate, private chat room prior to the close of the fix period, HSBC Trader informs Bank W Trader 2 at 3:25 pm that he should buy cable at the fix. Shortly thereafter, HSBC Trader tells Bank W Trader 2 that he has a net sell order of approximately 400 million cable at the fix, and Bank W Trader 2 says he is a seller of 150 million cable at the fix:

As the 4 p.m. fix period closes, HSBC Trader and the other participants in the chat room made the following statements:

At the same time, HSBC Trader discloses he is selling at the fix in yet another private chat with a trader at Bank V prior to the close of the fix period, at 3:28 pm:

As the 4 p.m. fix period ends, Bank V Trader and HSBC Trader continue:

In a fourth chat room, HSBC Trader discloses his position with traders at other banks prior to the close of the fix period. The traders starting at 3:36 pm share information about the size and direction of the net orders at the fix period:

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⁷ Like the term “cable”, “betty” is also a shorthand name for British Pound Sterling used by some FX traders.

While participating in the four separate chat rooms referenced above, at 3:38 pm, HSBC Trader simultaneously commented in three additional chat rooms in which traders from Bank V, Bank W, and Bank N also participated in, that he was “lhs in cable at the fix” and “good amount.”

Commencing at 3:43 pm, in another private chat, Bank W Trader 1 told HSBC Trader that another firm, which was not a participant in the chat room, was “building” in the opposite direction to them and would be buying at the fix. At 3:43 pm, Bank W Trader 1 then reported that he has taken action to net off against this order, which would be in the opposite direction at the fix than Bank W Trader 1’s and HSBC Trader’s positions:

In another chat room, HSBC Trader and a different trader at Bank W discuss unloading positions just prior to the fix period commencing at 3:54 p.m.:

HSBC Trader’s practice of communicating confidential information ( i.e. , size and direction of orders) and similar information soliciting and directing banks to follow suit during the fix period, in an effort to benefit his trading positions by jointly attempting to manipulate benchmark exchange rates, continued on various days in 2011 and 2012 until he left HSBC in mid-2012.

In addition to HSBC Trader, at least one other HSBC FX trader received or disseminated information in chat rooms which involved confidential size and direction orders and used this information to attempt to manipulate benchmark exchange rate. For example, one day during the Relevant Period, this HSBC FX trader accumulated orders from another trader and through brokers to sell a large volume during the fix period in order to have more influence over the benchmark exchange rate.

4. Respondent Lacked Adequate Internal Controls

During the Relevant Period, HSBC failed to adequately assess the risks associated with its FX traders participating in the fixing of certain FX benchmark rates. HSBC also lacked adequate internal controls in order to prevent its FX traders from engaging in improper communications with certain FX traders at other banks. HSBC lacked sufficient policies, procedures, and training specifically governing participation in trading around the FX benchmarks rates and had inadequate policies pertaining to, or insufficient oversight of, its FX traders’ use of chat rooms or other electronic messaging.

After the Relevant Period, in December 2012, HSBC banned multi-bank chat rooms for its FX personnel. In mid-2013, HSBC commenced an internal investigation of possible misconduct by its FX traders relating to foreign exchange benchmarks. HSBC has undertaken certain remedial measures to improve its internal controls.

IV.

LEGAL DISCUSSION

Together, Sections 6(c), ⁸ 6(d), and 9(a)(2) of the Act prohibit acts of attempted manipulation. 7 U.S.C. §§ 9, 13b and 13(a)(2) (2012). Section 9(a)(2) of the Act makes it unlawful for “[a]ny person to . . . attempt to manipulate the price of any commodity in interstate commerce, or for future delivery on or subject to the rules of any registered entity . . . .” 7  U.S.C. § 13(a)(2) (2012). Sections 6(c) and 6(d) of the Act authorize the Commission to serve a complaint and provide for the imposition of, among other things, civil monetary penalties and cease and desist orders if the Commission “has reason to believe that any person” has attempted

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⁸ Section 6(c) was amended effective August 15, 2011. For conduct occurring on or after that date, the relevant is now Section 6(c)(4)(A), 7 U.S.C. § 9(4)(A) (2012).

to manipulate the market price of any commodity, in interstate commerce, or otherwise is violating or has violated any of the provisions of the Act. 7 U.S.C. §§ 9,13b (2012).

With respect to conduct on or after August 15, 2011, in addition to Sections 6(c), 6(d), and 9(a)(2), Section 6(c)(3) of the Act prohibits the attempted manipulation of the price of any commodity in interstate commerce. 7 U.S.C. § 9(3) (2012). Commission Regulation 180.2, 17 C.F.R. §180.2 (2014), which became effective on August 15, 2011, in relevant part, makes it “unlawful to … directly or indirectly to attempt to manipulate, the price of …any commodity in interstate commerce.” Regulation 180.2 codifies Section 6(c)(3).

Two elements are required to prove an attempted manipulation: (1) an intent to affect the market price, and (2) an overt act in furtherance of that intent. See In re Hohenberg Bros. Co. [1975-77 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 20,271, at 21,477 (CFTC Feb. 18, 1977); CFTC v. Bradley , 408 F. Supp. 2d 1214, 1220 (N.D. Okla. 2005). To prove the intent element of attempted manipulation, it must be shown that HSBC FX traders “acted (or failed to act) with the purpose or conscious object of causing or effecting a price or price trend in the market that did not reflect the legitimate forces of supply and demand.” In re Indiana Farm Bureau Coop. Ass’n , [1982-1984 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 21,796, at 27,283 (CFTC Dec. 17, 1982). “[W]hile knowledge of relevant market conditions is probative of intent, it is not necessary to prove that the accused knew to any particular degree of certainty that his actions would create an artificial price. It is enough to present evidence from which it may reasonably be inferred that the accused ‘consciously desire[d] that result, whatever the likelihood of that result happening from his conduct. ’” Id . (quoting U.S. v. U.S. Gypsum Co. , 438 U.S. 422, 445 (1978)). A profit motive may also be evidence of intent, although profit motive is not a necessary element of an attempted manipulation. See In re DiPlacido [2007-2009 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 30,970, at 62,484 (CFTC Nov. 5, 2008) (citing In re Hohenberg Bros. Co. , [1975-1977 Transfer Binder] Comm. Fut. L. Rep. (CCH) at 21,478)), aff’d , 364 Fed. Appx. 657, No. 08-5559-ag, 2009 WL 3326624 (2d Cir. 2009). It is also not necessary that there be an actual effect on price. See CFTC v. Amaranth Advisors, L.L.C., 554 F. Supp.2d 523, 533 (S.D.N.Y. 2008).

Here, as evidenced by the foregoing, HSBC engaged in acts of attempted manipulation in violation of Sections 6(c), 6(d) and 9(a)(2) of the Act, 7 U.S.C. §§ 9, 13b and 13(a)(2) (2012). Additionally, with respect to conduct occurring on or after August 15, 2011, HSBC engaged in acts of attempted manipulation in violation of Section 6(c)(3), 7 U.S.C. § 9(3)(2012), and Regulation 180.2, 17 C.F.R. § 180.2 (2014).

Pursuant to Section 13(a) of the Act, liability as an aider and abettor requires proof that: (1) the Act was violated, (2) the aider and abettor had knowledge of the wrongdoing underlying the violation, and (3) the aider and abettor intentionally assisted the primary wrongdoer. See 7 U.S.C. § 13c(a) (2012); In re Sharokh Nikkhah , [1999-2000 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 28,129, at 49,888 n.28 (CFTC May 12, 2000). Although actual knowledge of the primary wrongdoer’s conduct is required, knowledge of the unlawfulness of such conduct is not

necessarily required to be demonstrated. See In re Lincolnwood Commodities, Inc. , [1982-1984 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 21,986, at 28,255 (CFTC Jan. 31, 1984). Knowing assistance can be inferred from the surrounding facts and circumstances. Id . See also In re Buckwalter , [1990-1992 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 24,995, at 37,686 (CFTC Jan. 25, 1991).

Here, as evidenced by the foregoing, FX traders at other banks attempted to manipulate the WM/R and other FX benchmark rates in violation of Sections 6(c), 6(d), and 9(a)(2) of the Act, 7 U.S.C. §§ 9, 13b and 13(a)(2) (2012). Additionally, with respect to conduct occurring on or after August 15, 2011 FX traders at other banks violated Section 6(c)(3) of the Act, 7 U.S.C. § 9(3), and Regulation 180.2, 17 C.F.R. § 180.2 (2014). As evidenced above, HSBC, through the acts of certain of its FX traders, aided and abetted the attempts of traders at other banks to manipulate the FX benchmark rates in violation of the Act.

Section 2(a)(1)(B) of the Act, 7 U.S.C. § 2(a)(1)(B) (2012), and Regulation 1.2, 17 C.F.R. § 1.2 (2014), provide that “[t]he act, omission, or failure of any official, agent or other person acting for any individual, association, partnership, corporation, or trust within the scope of his employment or office shall be deemed the act, omission, or failure of such individual, association, partnership, corporation or trust[.]” Pursuant to Section 2(a)(1)(B) of the Act and Commission Regulation 1.2, strict liability is imposed on principals for the actions of their agents. See, e.g., Rosenthal & Co. v. CFTC, 802 F.2d 963, 966 (7th Cir. 1986); Dohmen- Ramirez & Wellington Advisory, Inc. v. CFTC , 837 F.2d 847, 857-58 (9th Cir. 1988).

HSBC is liable for the acts, omissions and failures of its traders who acted as its employees and/or agents in the conduct described above. Accordingly, HSBC violated Sections 6(c), 6(d) and 9(a)(2), 7 U.S.C. §§ 9, 13b and 13(a)(2)(2012), by engaging in attempted manipulation and aiding and abetting attempted manipulation. Additionally, with respect to conduct occurring on or after August 15, 2011, HSBC is liable for violating Section 6(c)(3), 7 U.S.C. § 9(c)(3), 13(a)(2) (2012) and Regulation 180.2, 17 C.F.R. § 180.2 (2014), as set forth above.

V.

FINDINGS OF VIOLATIONS

Based on the foregoing, the Commission finds that Respondent violated Sections 6(c), 6(d) and 9(a)(2) of the Act, 7 U.S.C. §§ 9, 13b and 13(a)(2) (2012), and for conduct occurring on or after August 15, 2011, Section 6(c)(3), 7 U.S.C. § 9(3) and Regulation 180.2, 17 C.F.R. §

180.2 (2014).

VI.

OFFER OF SETTLEMENT

Respondent, without admitting or denying the findings or conclusions herein, has submitted the Offer in which it:

Upon consideration, the Commission has determined to accept the Offer.

VII. ORDER  

Accordingly, IT IS HEREBY ORDERED THAT:

Commodity Futures Trading Commission

Division of Enforcement

ATTN: Accounts Receivables --- AMZ 340

E-mail Box: 9-AMC-AMZ-AR-CFTC DOT/FAA/MMAC

6500 S. MacArthur Blvd. Oklahoma City, OK 73169

Telephone: (405) 954-7262

If payment is to be made by electronic funds transfer, Respondent shall contact Nikki Gibson or her successor at the above address to receive payment instructions and shall fully comply with those instructions. Respondent shall accompany payment of the CMP Obligation with a cover letter that identifies the Respondent and the name and docket number of this proceeding. The Respondent shall simultaneously transmit copies of the cover letter and the form of payment to the Chief Financial Officer, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW, Washington, D.C. 20581.

1. REMEDIATION

As set forth above in Section VI, paragraph F, Respondent represents that it has already undertaken and continues to undertake extensive remedial measures to implement and strengthen its internal controls and procedures relating to its participation in the fixing of FX benchmark rates and related supervision of its FX traders. With respect to its remediation efforts to the extent not already undertaken, Respondent undertakes that:

2. COOPERATION WITH THE COMMISSION

In this action, and in any investigation or other action instituted by the Commission, related to the subject matter of this action, Respondent shall cooperate fully and expeditiously with the Commission, including the Division, As part of such cooperation, Respondent agrees to the following for a period of three (3) years from the date of the entry of this Order, or until all related investigations and litigations in which the Commission, including the Division, is a party, are concluded, including through the appellate review process, whichever period is longer:

4.   Provide copies of non-privileged documents within HSBC’s possession, custody or control;

5.   Subject to applicable laws and regulations, HSBC will make its best efforts to produce any current (as of the time of the request) officer, director, employee, or agent of HSBC, regardless of the individual’s location, and at such location that minimizes Commission travel expenditures, to provide assistance at any trial, proceeding, or Commission investigation related to the subject matter of this proceeding, including, but not limited to, requests for testimony, depositions, and/or interviews, and to encourage them to testify completely and truthfully in any such proceeding, trial, or investigation; and

6.   Subject to applicable laws and regulations, HSBC will make its best efforts to assist in locating and contacting any prior (as of the time of the request) officer, director, employee or agent of HSBC.

Respondent also agrees that it will not undertake any act that would limit its ability to cooperate fully with the Commission. HSBC will designate an agent located in the United States of America to receive all requests for information pursuant to these Undertakings, and shall provide notice regarding the identity of such Agent to the Division upon entry of this Order. Should HSBC seek to change the designated agent to receive such requests, notice of such intention shall be given to the Division fourteen (14) days before it occurs. Any person designated to receive such request shall be located in the United States of America.

3. PROHIBITED OR CONFLICTING UNDERTAKINGS

Should the Undertakings herein be prohibited by, or be contrary to the provisions of any obligations imposed on Respondent by any presently existing, or hereinafter enacted or promulgated laws, regulations, regulatory mandates, or the rules or definitions issued by a Benchmark Publisher, then Respondent shall promptly transmit notice to the Commission (through the Division) of such prohibition or conflict, and shall meet and confer in good faith with the Commission (through the Division) to reach an agreement regarding possible modifications to the Undertakings herein sufficient to resolve such inconsistent obligations. In the interim, Respondent will abide by the obligations imposed by the law, regulations, regulatory mandates and Benchmark Publishers’ rules and definitions. Nothing in these Undertakings shall limit, restrict or narrow any obligations pursuant to the Act or the Commission’s Regulations promulgated thereunder, including, but not limited to, Regulations 1.31 and 1.35, 17 C.F.R. §§ 1.31 and 1.35 (2014), in effect now or in the future.

4. PUBLIC STATEMENTS

Respondent agrees that neither it nor any of its successors and assigns, agents or employees under its authority or control shall take any action or make any public statement denying, directly or indirectly, any findings or conclusions in this Order or creating, or tending to create, the impression that this Order is without a factual basis; provided, however, that nothing in this provision shall affect Respondent's (i) testimonial obligations, or (ii) right to take positions in other proceedings to which the Commission is not a party. Respondent and its successors and assigns shall undertake all steps necessary to entire that all of their agents and/or employees under their authority or control understand and comply with this agreement.

6. PARTIAL SATISFACTION

Respondent understands and agrees that any acceptance by the Commission of partial payment of Respondent's CMP Obligation shall not be deemed a waiver of its obligation to make further payments pursuant to this Order, or a waiver of the Commission's right to seek to compel payment of any remaining balance.

The provisions of this Order shall be effective as of this date.

By the Commission.

/s/ Christopher J. Kirk patrick

Christopher J. Kirk patrick

Secretary of the Commission

Commodity Futures Trading Commission

Dated: November 11, 2014

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