October 1, 2019
CFTC Charges HSBC with Reporting Failures and with First Ever Violation of Swap-Dealer Risk Management Regulations
Washington, DC — On Monday, September 30, 2019, the CFTC filed and settled charges against HSBC Bank USA, N.A., a provisionally registered swap dealer, for failing to establish appropriate risk management systems for its swap activities or to properly report swap data in certain categories, for certain swap transactions, to a swap data repository. The CFTC order imposes a $650,000 civil monetary penalty on HSBC, among other sanctions. The order recognizes that the civil monetary penalty in this matter was reduced in light of HSBC’s cooperation and remediation.
With respect to risk management, the order specifically finds that from January 2013 until November 2015, HSBC did not designate a swap dealer governing body or senior management to fulfill the requisite oversight duties under CFTC regulations. Relatedly, with respect to its swap dealing activities, HSBC failed to:
- Separately consider certain risks associated with its swap activities;
- Properly approve its risk tolerance limits, risk management program and policies and procedures, and trading policies; and
- Properly review its quarterly risk exposure reports, annual audits of its risk management program, and its business continuity and disaster recovery plan.
Pamela M. Geraghty of the Division of Swap Dealer and Intermediary Oversight and Meghan Tente of the Division of Market Oversight assisted with this matter.
The Division of Enforcement staff members responsible for this case are Michael Geiser, Peter Janowski, Candice Aloisi, Lenel Hickson, Jr., and Manal M. Sultan.