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Litigation and Regulatory Matters
6 Months Ended
Jun. 30, 2017
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 2016 Form 10-K and in Note 18, "Litigation and Regulatory Matters," in our Form 10-Q for the three month period ended March 31, 2017 (the "2017 First Quarter Form 10-Q"). Only those matters with significant updates and new matters since our disclosure in our 2016 Form 10-K and our 2017 First Quarter Form 10-Q are reported herein.
In addition to the matters described below, and in our 2016 Form 10-K and our 2017 First 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.
Due to 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 2016 Form 10-K and in Note 18, "Litigation and Regulatory Matters," in our 2017 First 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 $350 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 2016 Form 10-K and in Note 18, "Litigation and Regulatory Matters," in our 2017 First 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. JPMorgan Chase et al. (N.D.Cal. No. 13-CV-5816) In April 2017, the U.S. Supreme Court denied plaintiff’s petition for a writ of certiorari and the matter is now concluded.
DeKalb County, et al. v. HSBC North America Holdings Inc., et al. In May 2017, the U.S. Supreme Court issued its decision in the City of Miami case, affirming the Eleventh Circuit’s finding that a municipal plaintiff can be within the zone of interest conceivably protected by the Fair Housing Act. The court did not determine whether the injuries alleged by the city met the proximate cause test, but provided guidance for the lower courts in employing that test in further proceedings. This matter remains stayed pending direction from the Eleventh Circuit in the City of Miami matter.
County of Cook v. HSBC North America Holdings Inc., et al. In May 2017, the U.S. Supreme Court issued its decision in the City of Miami case, affirming the Eleventh Circuit’s finding that a municipal plaintiff can be within the zone of interest conceivably protected by the Fair Housing Act. The court did not determine whether the injuries alleged by the city met the proximate cause test, but provided guidance for the lower courts in employing that test in further proceedings. Subsequent to the decision, the stay was lifted and a scheduling order entered. An amended complaint was filed in July 2017.
Credit Default Swap Matters
In July 2017, the U.S. District Court for the Southern District of New York entered an order approving the final distribution of settlement funds in In re Credit Default Swaps Antitrust Litigation.
In June 2017, an action was filed by TeraExchange, LLC ("Tera"), a swaps execution facility, as well as its affiliates, against more than two dozen financial institutions, including HSBC, HSBC Bank plc, HSBC Bank USA and HSI, alleging violations of federal and state antitrust laws, and breaches of common law, arising out of an alleged conspiracy among the defendants to boycott Tera from the credit default swap trading market. This action is at an early stage.
Foreign Exchange ("FX") Matters
Canada Litigation HSBC has resolved the Canada FX matters (Staines and Beland) for a total of $15.5 million Canadian dollars. The settlement has been submitted to the court for approval.
U.S. Investigations HSBC is in active discussions with U.S. authorities about a potential resolution of their investigations regarding HSBC’s foreign exchange business.
Precious Metals Fix Matters
In re Commodity Exchange Inc., Gold Futures and Options Trading Litigation (Gold Fix Litigation) In June 2017, the court granted plaintiffs leave to file a third amended complaint. The third amended complaint names a new defendant. The court has denied the pre-existing defendants’ request to move to dismiss the third amended complaint. HSBC and the other pre-existing defendants have requested a stay of discovery.
In re London Silver Fixing, Ltd. Antitrust Litigation (Silver Fix Litigation) In June 2017, the court granted plaintiffs leave to file a third amended complaint. The third amended complaint names several new defendants. The court has denied the pre-existing defendants’ request for leave to file a motion to dismiss. HSBC and the other pre-existing defendants have requested a stay of discovery.
Platinum and Palladium Fix Litigation Plaintiffs have filed a third amended complaint. The court has granted the defendants’ request to file a joint motion to dismiss the third amended complaint.
Canada Litigation A new gold fix proceeding entitled "Benoit v. Bank of Nova Scotia, et al.," has been filed in the Court in the province of Quebec. This new action names HSBC Bank plc, HSBC, HSBC Bank Canada, HSBC Securities (Canada), HUSI, and HSI as defendants, among others. The parties are seeking a stay of this new proceeding during the pendency of the Ontario gold fix proceedings (DiFilippo and Caron).
Benchmark Rate Litigation
In June 2017, HSBC Bank USA settled the ISDAFix litigation for $14 million. The settlement is subject to court approval.
Mortgage Securitization Matters 
As noted previously, discussions are ongoing with the U.S. Department of Justice regarding liability under the Financial Industry Reform, Recovery, and Enforcement Act in connection with certain residential mortgage-backed securities securitizations from 2005 to 2007.
Mortgage Securitization Trust Litigation In May 2017, HSBC Bank USA, as trustee, was sued by RMBS Recovery Holdings I, LLC et al in Circuit Court, Fairfax County, Virginia, seeking compensatory and punitive damages as a result of various claims arising out of HSBC’s role as securitization trustee for three trusts in which the plaintiffs are invested. This action is at an early stage.