HSBC Admits to Private-Banking Violations in SEC Settlement

HSBC Holdings Plc (HSBA) will pay $12.5 million to settle claims that its Swiss private-banking unit solicited U.S. investors without being registered.

HSBC Private Bank Suisse SA improperly amassed as many as 368 U.S. client accounts after starting to provide cross-border services more than 10 years ago, the SEC said in an administrative order filed today. The bank, which collected about $5.7 million in fees from the accounts, admitted wrongdoing as part of the settlement.

The allegations mirror those in earlier settlements with Credit Suisse Group AG and UBS AG, which were faulted in related criminal cases for helping Americans evade taxes. In 2008, after the investigation into UBS over cross-border banking became public, HSBC took steps to avoid accepting new U.S. clients, the SEC said.

“HSBC Private Bank’s efforts to prevent registration violations ultimately failed because their compliance initiatives were not effectively implemented or monitored,” SEC Enforcement Director Andrew Ceresney said in a statement.

Employees of the London-based bank solicited U.S. clients, provided investment advice and executed orders for securities transactions. The employees made more than 40 trips to the U.S. to meet with clients from 2003 to 2009, according to the SEC.

HSBC decided to exit the U.S. cross-border business in 2010, and nearly all of its U.S. client accounts were closed or transferred by the end of 2011, according to the agency.

HSBC said in a statement that it was pleased to have reached the settlement.