Litigation and Regulatory Matters

The following supplements, and should be read together with, the disclosure in Note 22, "Litigation and Regulatory Matters," in our 2015 Form 10-K and in Note 14, "Litigation and Regulatory Matters," in our Form 10-Q for the three month period ended March 31, 2016 (the "2016 First Quarter Form 10-Q") and our Form 10-Q for the six month period ended June 30, 2016 (the "2016 Second Quarter Form 10-Q"). Only matters with significant updates and new matters since our disclosure in our 2015 Form 10-K, 2016 First Quarter Form 10-Q and 2016 Second Quarter Form 10-Q are reported herein.

In addition to the matters described below and in our 2015 Form 10-K, 2016 First Quarter Form 10-Q and 2016 Second Quarter Form 10-Q, in the ordinary course of business, we are routinely named as defendants in, or as parties to, various legal actions and proceedings relating to activities of our current and/or former operations. These legal actions and proceedings may include claims for substantial or indeterminate compensatory or punitive damages, or for injunctive relief. In the ordinary course of business, we also are subject to governmental and regulatory examinations, information-gathering requests, investigations and proceedings (both formal and informal), certain of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. In connection with formal and informal inquiries by these regulators, we receive numerous requests, subpoenas and orders seeking documents, testimony and other information in connection with various aspects of our regulated activities.

In view of the inherent unpredictability of legal matters, including litigation, governmental and regulatory matters, particularly where the damages sought are substantial or indeterminate or when the proceedings or investigations are in the early stages, we cannot determine with any degree of certainty the timing or ultimate resolution of such matters or the eventual loss, fines, penalties or business impact, if any, that may result. We establish reserves for litigation, governmental and regulatory matters when those matters present loss contingencies that are both probable and can be reasonably estimated. Once established, reserves are adjusted from time to time, as appropriate, in light of additional information. The actual costs of resolving litigation and regulatory matters, however, may be substantially higher than the amounts reserved for those matters.

For the legal matters disclosed below, including litigation, governmental and regulatory matters, as well as for the legal matters disclosed in Note 22, "Litigation and Regulatory Matters," in our 2015 Form 10-K and in Note 14, "Litigation and Regulatory Matters," in the 2016 First Quarter Form 10-Q and 2016 Second Quarter Form 10-Q as to which a loss in excess of accrued liability is reasonably possible in future periods and for which there is sufficient currently available information on the basis of which we believe we can make a reliable estimate, we believe a reasonable estimate could be as much as $390 million for HSBC Finance Corporation. The legal matters underlying this estimate of possible loss will change from time to time and actual results may differ significantly from this current estimate.

Given the substantial or indeterminate amounts sought in certain of these matters, and the inherent unpredictability of such matters, an adverse outcome in certain of these matters could have a material adverse effect on our consolidated financial statements in any particular quarterly or annual period.

Litigation - Continuing Operations

Securities Litigation Jaffe v. Household International, Inc., et al. (N.D. Ill. No. 02 C5893) On October 20, 2016, the court issued final approval of the settlement and indicated its intent to enter final judgment on November 3, 2016.

Lender-Placed Insurance Matters The Massachusetts Attorney General distributed settlement payments to Massachusetts borrowers in July 2016.

Mortgage Securitization Activity The Deutsche Bank as Trustee of MSAC 2007-HE6 v. Decision One and HSBC Finance Corp. matter has been settled in principle for an amount that is fully reserved.

Litigation - Discontinued Operations

Salveson v. JPMorgan Chase et al. The U.S. Court of Appeals for the Second Circuit affirmed the district court's dismissal of the action in October 2016.

DeKalb County et al. v. HSBC North America Holdings Inc., et al. This matter has been stayed pending U.S. Supreme Court review of the U.S. Court of Appeals for the Eleventh Circuit decision reversing motions to dismiss two similar cases filed against other lenders in City of Miami v. Bank of America Corp. & Wells Fargo & Co. Oral argument in City of Miami is scheduled for November 2016.

County of Cook v. HSBC North America Holdings Inc., et al. This matter has been stayed pending U.S. Supreme Court review of the U.S. Court of Appeals for the Eleventh Circuit decision reversing motions to dismiss two similar cases filed against other lenders in City of Miami v. Bank of America Corp. & Wells Fargo & Co. Oral argument in City of Miami is scheduled for November 2016.