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HSBC Faces Forex Trade Manipulation Allegations from ECU
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HSBC Holdings plc (HSBC - Free Report) is once again being accused of “front running” foreign exchange transactions by London-based currency manager, ECU Group for its three major trades carried out in 2006, each worth more than $100 million. The news was reported by the Financial Times.
In 2006, ECU sensed that traders at HSBC were front running its forex orders to make profit for themselves at the expense of the firm. This is because every time the firm placed a large order, the markets seemed to move against it.
When the firm complained about the same, HSBC promised that it would conduct an internal enquiry. No legal action was taken and the matter was dropped since no evidence of wrongdoing was found.
However, last year, the US Department of Justice (DoJ) issued arrest warrants against Mark Johnson and Stuart Scott, two of HSBC’s top forex traders accusing them of rigging a $3.5 billion pound sterling order placed by energy group Cairn.
Although neither Johnson nor Scott are in jail any longer, this action by the DoJ provided enough evidence to the ECU to doubt the findings of the initial investigation carried out in 2006. Hence the ECU decided to bring the matter to light once again.
Thus, ECU has now filed an application for pre-action disclosure with London’s commercial court requiring HSBC to hand over all records relating to the 2006 trades. ECU requires HSBC to provide all documents related to the internal enquiry carried out in 2006, its interbank dealing tickets, its deal log entries and any relevant information.
Even though taking legal action six years after the actual event took place is not allowed, the same can be conducted if there are enough evidences to prove that the defendant had tried to conceal the matter at the time of the wrongdoing.
The DoJ is still investigating HSBC for similar forex rigging cases. Notably, in Nov 2014, amid the widespread global investigation by U.S., British and Swiss regulators into alleged FX market manipulation, six major banks including HSBC were fined $4.3 billion. The other banks were The Royal Bank of Scotland Group plc , JPMorgan Chase & Co. (JPM - Free Report) , Citigroup Inc. (C - Free Report) , UBS Group AG (UBS - Free Report) and Bank of America Corporation (BAC - Free Report) .
Despite facing regulatory probes, HSBC should continue benefitting from its extensive global network, strong capital position and a solid asset growth. Disposal of unprofitable/non-core businesses should continue to enhance the company's operating efficiency, thereby supporting profitability over the longer term. Shares of HSBC gained 36.2% in the last one year, outperforming the Zacks categorized Banks - Foreign industry’s growth of 16.8%.
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HSBC Faces Forex Trade Manipulation Allegations from ECU
HSBC Holdings plc (HSBC - Free Report) is once again being accused of “front running” foreign exchange transactions by London-based currency manager, ECU Group for its three major trades carried out in 2006, each worth more than $100 million. The news was reported by the Financial Times.
In 2006, ECU sensed that traders at HSBC were front running its forex orders to make profit for themselves at the expense of the firm. This is because every time the firm placed a large order, the markets seemed to move against it.
When the firm complained about the same, HSBC promised that it would conduct an internal enquiry. No legal action was taken and the matter was dropped since no evidence of wrongdoing was found.
However, last year, the US Department of Justice (DoJ) issued arrest warrants against Mark Johnson and Stuart Scott, two of HSBC’s top forex traders accusing them of rigging a $3.5 billion pound sterling order placed by energy group Cairn.
Although neither Johnson nor Scott are in jail any longer, this action by the DoJ provided enough evidence to the ECU to doubt the findings of the initial investigation carried out in 2006. Hence the ECU decided to bring the matter to light once again.
Thus, ECU has now filed an application for pre-action disclosure with London’s commercial court requiring HSBC to hand over all records relating to the 2006 trades. ECU requires HSBC to provide all documents related to the internal enquiry carried out in 2006, its interbank dealing tickets, its deal log entries and any relevant information.
Even though taking legal action six years after the actual event took place is not allowed, the same can be conducted if there are enough evidences to prove that the defendant had tried to conceal the matter at the time of the wrongdoing.
The DoJ is still investigating HSBC for similar forex rigging cases. Notably, in Nov 2014, amid the widespread global investigation by U.S., British and Swiss regulators into alleged FX market manipulation, six major banks including HSBC were fined $4.3 billion. The other banks were The Royal Bank of Scotland Group plc , JPMorgan Chase & Co. (JPM - Free Report) , Citigroup Inc. (C - Free Report) , UBS Group AG (UBS - Free Report) and Bank of America Corporation (BAC - Free Report) .
Despite facing regulatory probes, HSBC should continue benefitting from its extensive global network, strong capital position and a solid asset growth. Disposal of unprofitable/non-core businesses should continue to enhance the company's operating efficiency, thereby supporting profitability over the longer term. Shares of HSBC gained 36.2% in the last one year, outperforming the Zacks categorized Banks - Foreign industry’s growth of 16.8%.
Currently, HSBC carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
3 Stocks to Ride a 588% Revenue Explosion
At Zacks, we're mostly focused on short-term profit cycles, but the hottest of all technology mega-trends is starting to take hold...
By last year, it was already generating $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for those who make the right trades early. See Zacks' Top 3 Stocks to Ride This Space >>