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Litigation and Regulatory Matters
9 Months Ended
Sep. 30, 2016
Commitments and Contingencies Disclosure [Abstract]  
Litigation and Regulatory Matters
Litigation and Regulatory Matters
 
The following supplements, and should be read together with, the disclosure in Note 27, "Litigation and Regulatory Matters," in our 2015 Form 10-K and in Note 20, "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 the six month period ended June 30, 2016 (the "2016 Second Quarter Form 10-Q"). Only those matters with significant updates and new matters since our disclosure in our 2015 Form 10-K, our 2016 First Quarter Form 10-Q and our 2016 Second Quarter Form 10-Q are reported herein.
In addition to the matters described below, and in our 2015 Form 10-K, our 2016 First Quarter Form 10-Q and our 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 and governmental and regulatory matters, as well as for the legal matters disclosed in Note 27, "Litigation and Regulatory Matters," in our 2015 Form 10-K and in Note 20, "Litigation and Regulatory Matters," in our 2016 First Quarter Form 10-Q and our 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 management believes it can make a reliable estimate, we believe a reasonable estimate could be as much as $330 million for HUSI. 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.
Based on the facts currently known, in respect of each of the below investigations as well as for the investigations disclosed in Note 27, "Litigation and Regulatory Matters," in our 2015 Form 10-K and in Note 20, "Litigation and Regulatory Matters," in our 2016 First Quarter Form 10-Q and our 2016 Second Quarter Form 10-Q, it is not practicable at this time for us to determine the terms on which these ongoing investigations will be resolved or the timing of such resolution. As matters progress, it is possible that any fines and/or penalties could be significant.
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.
Salveson v. JP Morgan 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.
Checking Account Overdraft Litigation The court issued an order in October 2016 granting final approval of the settlement.
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.
Lender-Placed Insurance Matters As discussed in our 2015 Form 10-K, in January 2014, HSBC Mortgage Corporation (USA)
and various other HSBC entities agreed to a settlement with the Massachusetts Attorney General concerning allegations of conflict of interest in placement of lender placed insurance and the HSBC entities paid approximately $4 million to be held in escrow until the settlement was finalized. On February 17, 2016, the settlement was finalized by the filing of an Assurance of Discontinuance in the Massachusetts Superior Court. The Massachusetts Attorney General distributed settlement payments to Massachusetts borrowers in July 2016.
Private Mortgage Insurance Matters Following a ruling in a similar matter by the U.S. Court of Appeals for the Third Circuit, the parties agreed to settle the matter on an individual basis. The case was discontinued with prejudice in September 2016.
Foreign Exchange (“FX”) Matters
In September 2016, a new lawsuit alleging federal and state antitrust claims was filed in the U.S. District Court for the Southern District of New York by “indirect” FX purchasers who invested in funds that engaged in FX-related transactions. The action purports to assert claims for New York and California sub-classes under state law and has been assigned to the judge overseeing the pending FX class action settlement.
Precious Metals Fix Matters
In re Commodity Exchange Inc., Gold Futures and Options Trading Litigation (Gold Fix Litigation) Defendants’ motion to dismiss the second amended consolidated complaint was granted in part and denied in part in October 2016.
In re London Silver Fixing, Ltd. Antitrust Litigation (Silver Fix Litigation) Defendants’ motion to dismiss the second amended consolidated complaint was granted in part and denied in part in October 2016.
Madoff Litigation
In September 2016, the U.S. District Court for the Southern District of New York granted the HSBC defendants’ motion to dismiss in Stephen and Leyla Hill, et al. v. HSBC Bank plc, et al. (Case No. 14-CV-9745(LTS)).
Anti-Money Laundering, Bank Secrecy Act and Office of Foreign Assets Control Matters
Charlotte Freeman, et al. v. HSBC Holdings plc, et al. Defendants moved to dismiss plaintiffs’ second amended complaint in September 2016.
Jeffrey Siegel, et al. v. HSBC Holdings plc, et al. HSBC defendants’ motion to dismiss is due in December 2016.
Ramiro Giron, et al. v. Hong Kong and Shanghai Bank Company Ltd., et al. In October 2016, the court granted the Hong Kong and Shanghai Banking Company’s motion to dismiss, having previously granted in part and denied in part HSBC Bank USA’s motion.