HSBC Securities (Canada) fined $625,000 for compliance violations

First settlement under RS trading supervision rule

By: James Langton
August 23, 2004 August 23, 2004
16:20

HSBC Securities (Canada) Inc. has agreed to a $625,000 fine in a settlement deal with Market Regulation Services Inc. for deficiencies with its trade desk compliance and trading supervision obligations.

An RS hearing panel today approved a settlement agreement between RS and HSBC Securities.

The deal closes the first case brought by RS under the Trading Supervision Obligations rule and policy. That policy was established in the wake of the RT Capital high closing scandal, and was designed to ensure that trading abuses on that scale were prevented.

Under the terms of the deal, HSBC Securities must also pay $87,500 towards the cost of RS’s investigation. As well, the HSBC Securities board must certify to RS that the firm has adopted and implemented the recommendations from a PriceWaterhouseCoopers’ report commissioned earlier this year.

HSBC Securities’ president and CEO, Simon Edwards, said that the firm has already implemented the changes recommended by both PwC and RS, which aim to improve its internal policies and reporting practices.

RS alleged that

between January and December of 2003, HSBC Securities failed to conduct quarterly reviews for all trading conducted by it;
between December 2003 and March 2004, the firm failed to conduct the monthly compliance monitoring for artificial pricing;
in 2003, in some instances HSBC Securities failed to address and rectify RS Trade Desk Review findings, and failed to live up to promises to do so; and
from July 2002 to March 2004, senior management and the board of HSBC Securities failed to identify and fix these issues.

RS says that its investigation revealed that the continued systemic failures at various levels within the firm, “showed that ultimately the firm’s board were ineffective stewards in relation to their responsibilities”.

In a statement, Maureen Jensen, vice president Market Regulation at RS, said, “Although no harm to investors occurred, the firm did not appreciate the importance of these duties in preventing risk to both the firm, its clients and to the capital markets.”