Litigation and Regulatory Matters

3 Months Ended

Mar. 31, 2021

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 29, "Litigation and Regulatory Matters," in our 2020 Form 10-K. Only those matters with significant updates and new matters since our disclosure in our 2020 Form 10-K are reported herein.

In addition to the matters described below and in our 2020 Form 10-K, 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 29, "Litigation and Regulatory Matters," in our 2020 Form 10-K, 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 $150 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.

In addition, based on the facts currently known for each of the ongoing investigations disclosed in Note 29, "Litigation and Regulatory Matters," in our 2020 Form 10-K, 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.

Mortgage Securitization Matters 

In 2013, Deutsche Bank National Trust Company, as trustee of HASCO 2007-NC1, filed a complaint in New York County Supreme Court, State of New York, naming HSBC Bank USA as the sole defendant. The parties finalized the settlement of the matter in March 2021, and the matter is now concluded.

Mortgage Securitization Trust Litigation The court granted in part and denied in part the motion to dismiss in the action brought by IKB Bank AG in New York State court. A trial has been scheduled for Fall 2022 in the RMBS Recovery Holdings I, LLC case pending in Virginia state court.

Anti-Terrorism Act Cases

Mary Zapata, et al. v. HSBC Holdings plc, et al. Following the US Court of Appeals for the Second Circuit's decision affirming the lower court's dismissal of the action, the matter is now concluded.

Dana Bernhardt et al. v. HSBC Holdings plc, et al. In February 2021, plaintiffs filed an appeal of the decision granting the HSBC defendants' motion to dismiss.

Rigoberto Vasquez and Eva Garcia et al v. Hong Kong and Shanghai Banking Corporation Ltd., HSBC Bank USA, N.A., et al. By agreement among the parties, plaintiffs will dismiss the appeal. The matter is now concluded.