Filed Pursuant to Rule 433
Registration No. 333-180289
May 24, 2013
FREE WRITING PROSPECTUS
(To Prospectus dated March 23, 2012,
Prospectus Supplement dated March 22, 2012 and
ETF Underlying Supplement dated March 22, 2012)
HSBC USA Inc.
Buffered Accelerated Market Participation
SecuritiesTM
(“Buffered AMPS”)
| } | Buffered AMPSTM linked to the iShares® MSCI Emerging Markets Index Fund |
| } | Maturity of four years |
| } | 1.11x exposure to any positive return of the reference asset, subject to a maximum return |
| } | Protection from the first 25% of any losses in the reference asset, with 1.3333% exposure to each 1% loss of the reference asset beyond -25% |
| } | All payments on the securities are subject to the credit risk of HSBC USA Inc. |
The Buffered Accelerated Market Participation SecuritiesTM (“Buffered AMPS” or, each a “security” and collectively the “securities") offered hereunder will not be listed on any U.S. securities exchange or automated quotation system. The securities will not bear interest.
Neither the U.S. Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of the securities or passed upon the accuracy or the adequacy of this document, the accompanying prospectus, prospectus supplement or ETF underlying supplement. Any representation to the contrary is a criminal offense. We have appointed HSBC Securities (USA) Inc., an affiliate of ours, as the agent for the sale of the securities. HSBC Securities (USA) Inc. will purchase the securities from us for distribution to other registered broker-dealers or will offer the securities directly to investors. In addition, HSBC Securities (USA) Inc. or another of its affiliates or agents may use the pricing supplement to which this free writing prospectus relates in market-making transactions in any securities after their initial sale. Unless we or our agent informs you otherwise in the confirmation of sale, the pricing supplement to which this free writing prospectus relates is being used in a market-making transaction. See “Supplemental Plan of Distribution (Conflicts of Interest)” on page FWP-13 of this free writing prospectus.
Investment in the securities involves certain risks. You should refer to “Risk Factors” beginning on page FWP-7 of this document, page S-3 of the accompanying prospectus supplement and page S-2 of the accompanying ETF Underlying Supplement.
| Price to Public | Underwriting Discount1 | Proceeds to Issuer | |
| Per security | $1,000 | ||
| Total |
1 See “Supplemental Plan of Distribution (Conflicts of Interest)” on page FWP-13 of this free writing prospectus.
The Securities:
| Are Not FDIC Insured | Are Not Bank Guaranteed | May Lose Value |
HSBC USA Inc.
Buffered Accelerated Market Participation SecuritiesTM
(Buffered AMPS) Linked to the iShares® MSCI Emerging Markets Index Fund
Indicative Terms*
| Principal Amount | $1,000 per security |
| Reference Asset | iShares® MSCI Emerging Markets Index Fund (“EEM”) |
| Term | Four years |
| Upside Participation Rate |
111% (1.11x) exposure to any positive Reference Return, subject to the Maximum Cap |
| Buffer Value | -25% |
| Downside Leverage Factor | 1.3333 |
| Reference Return |
Final Price – Initial Price Initial Price |
| Payment at Maturity per security |
If the underlying Reference Return is greater than zero, you will receive the lesser of: a) $1,000 + ($1,000 × Reference Return × Upside Participation Rate); and b) $1,000 + ($1,000 × Maximum Cap). If the Reference Return is less than or equal to zero but greater than or equal to the Buffer Value: $1,000 (zero return). If the Reference Return is less than the Buffer Value: $1,000 + [$1,000 × (Reference Return + 25%) x Downside Leverage Factor]. For example, if the Reference Return is -26%, you will suffer a 1.3333% loss and receive 98.6667% of the Principal Amount, subject to the credit risk of HSBC. If the Reference Return is less than the Buffer Value, you will lose up to 100% of your investment. |
| Maximum Cap | 55% to 65%, which will be determined on the Pricing Date. |
| Initial Price | The Official Closing Price of the Reference Asset on the Pricing Date. |
| Final Price | The Official Closing Price of the Reference Asset on the Final Valuation Date. |
| Pricing Date | May 30, 2013 |
| Trade Date | May 30, 2013 |
| Original Issue Date | June 4, 2013 |
| Final Valuation Date | May 30, 2017 |
| Maturity Date | June 2, 2017 |
| CUSIP | 40432XFR7 |
* As more fully described beginning on page FWP-4.
The Buffered AMPSTM
For investors who seek a particular Market Exposure and believe that the Reference Asset will appreciate over the term of the Buffered AMPS, the Buffered AMPS provide an opportunity for accelerated returns (subject to a Maximum Cap). If the Reference Return is below the Buffer Value, then the Buffered AMPS is subject to 1.3333:1 exposure to any potential decline in the Reference Asset beyond -25%.
If the Reference Asset appreciates over the term of the securities, you will realize 111% (1.11x) of the Reference Asset appreciation, up to the Maximum Cap. If the Reference Asset declines, you will lose 1.3333% of your investment for every 1% decline in the Reference Asset beyond the -25% Buffer Value.
| The offering period for the Buffered AMPS is through May 30, 2013 |
| FWP-2 |
Payoff Example
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The table at right shows the hypothetical payout profile of an investment in the securities reflecting the 111% (1.11x) Upside Participation Rate and the 1.3333 (1.3333x) Downside Leverage Factor, and assuming a 55% Maximum Cap. The actual Maximum Cap will be determined on the Pricing Date.
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Information about the Reference Asset
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Description of the EEM
The EEM seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI Emerging Markets Index. The MSCI Emerging Markets Index is intended to measure the performance of equity markets in the global emerging markets. As of May 30, 2013, the MSCI Emerging Markets Index consisted of the following 21 component country indices: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey.
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For further information on the Reference Asset, please see “Information Relating to the Reference Asset” on page FWP-12 of this free writing prospectus and “The iShares® MSCI Emerging Markets Index Fund” beginning on page S-21 the accompanying ETF Underlying Supplement. We have derived all disclosure regarding the Reference Asset from publicly available information. Neither HSBC USA Inc. nor any of its affiliates have undertaken any independent review of, or made any due diligence inquiry with respect to, the publicly available information about the Reference Asset.
| FWP-3 |
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HSBC USA Inc. Buffered Accelerated Market Participation SecuritiesTM(Buffered AMPS) |
 |
Linked to the iShares® MSCI Emerging Markets Index Fund
This free writing prospectus relates to an offering of Buffered Accelerated Market Participation Securities. The securities will have the terms described in this free writing prospectus and the accompanying prospectus supplement, prospectus and ETF Underlying Supplement. If the terms of the securities offered hereby are inconsistent with those described in the accompanying prospectus supplement, prospectus or ETF Underlying Supplement, the terms described in this free writing prospectus shall control. You should be willing to forgo interest and dividend payments during the term of the securities and, if the Reference Return is less than the Buffer Value, lose up to 100% of your principal.
This free writing prospectus relates to an offering of securities linked to the performance of the iShares® MSCI Emerging Markets Index Fund. The purchaser of a security will acquire a senior unsecured debt security of HSBC USA Inc. linked to the Reference Asset, as described below. The following key terms relate to the offering of securities:
| Issuer: | HSBC USA Inc. |
| Principal Amount: | $1,000 per security |
| Reference Asset: | iShares® MSCI Emerging Markets Index Fund (“EEM”) |
| Trade Date: | May 30, 2013 |
| Pricing Date: | May 30, 2013 |
| Original Issue Date: | June 4, 2013 |
| Final Valuation Date: | May 30, 2017, subject to adjustment as described under “Additional Terms of the Notes—Valuation Dates” in the accompanying ETF Underlying Supplement. |
| Maturity Date: | 3 business days after the Final Valuation Date, and expected to be June 2, 2017. The Maturity Date is subject to adjustment as described under “Additional Terms of the Notes—Coupon Payment Dates, Call Payment Dates and Maturity Date” in the accompanying ETF Underlying Supplement. |
| Payment at Maturity: | On the Maturity Date, for each security, we will pay you the Final Settlement Value. |
| Reference Return: |
The quotient, expressed as a percentage, calculated as follows: Final Price – Initial Price Initial Price |
| Final Settlement Value: |
If the Reference Return is greater than zero, you will receive a cash payment on the Maturity Date, per $1,000 Principal Amount, equal to the lesser of: (a) $1,000 + ($1,000 × Reference Return × Upside Participation Rate); and (b) $1,000 + ($1,000 × Maximum Cap). If the Reference Return is less than or equal to zero but greater than or equal to the Buffer Value, you will receive $1,000 per $1,000 Principal Amount (zero return). If the Reference Return is less than the Buffer Value, you will receive a cash payment on the Maturity Date, per $1,000 Principal Amount, calculated as follows: $1,000 + [$1,000 × (Reference Return + 25%) x Downside Leverage Factor]. Under these circumstances, you will lose 1.3333% of the Principal Amount for each percentage point that the Reference Return is below the Buffer Value. For example, if the Reference Return is -26%, you will suffer a 1.3333% loss and receive 98.6667% of the Principal Amount, subject to the credit risk of HSBC. If the Reference Return is less than the Buffer Value, you will lose up to 100% of your investment. |
| Buffer Value: | -25% |
| Upside Participation Rate: | 111% |
| Maximum Cap: | 55% to 65%, which will be determined on the Pricing Date. |
| Downside Leverage Factor: | 1.3333 |
| Initial Price: | The Official Closing Price of the Reference Asset on the Pricing Date. |
| Final Price: | The Official Closing Price of the Reference Asset on the Final Valuation Date. |
| Official Closing Price: | The closing price of the Reference Asset on any scheduled trading day as determined by the calculation agent based upon the value displayed on the Bloomberg Professional® service page “EEM UP <EQUITY>”, any successor page on the Bloomberg Professional® service or any successor service, as applicable, subject to adjustment as described under “Additional Terms of the Notes—Antidilution and Reorganization Adjustments” in the accompanying ETF Underlying Supplement. |
| Form of Securities: | Book-Entry |
| Listing: | The securities will not be listed on any U.S. securities exchange or quotation system. |
| CUSIP/ISIN: | 40432XFR7/US40432XFR70 |
The Trade Date, the Pricing Date and the other dates set forth above are subject to change, and will be set forth in the final pricing supplement relating to the securities.
| FWP-4 |
GENERAL
This free writing prospectus relates to a single offering of securities linked to the Reference Asset identified on the cover page. The purchaser of a security will acquire a senior unsecured debt security of HSBC USA Inc. We reserve the right to withdraw, cancel or modify the offering and to reject orders in whole or in part. Although the offering of securities relates to the Reference Asset identified on the cover page, you should not construe that fact as a recommendation as to the merits of acquiring an investment linked to the Reference Asset or any component security included in the Reference Asset or as to the suitability of an investment in the securities.
You should read this document together with the prospectus dated March 22, 2012, the prospectus supplement dated March 22, 2012 and the ETF Underlying Supplement dated March 22, 2012. If the terms of the securities offered hereby are inconsistent with those described in the accompanying prospectus supplement, prospectus, or ETF Underlying Supplement, the terms described in this free writing prospectus shall control. You should carefully consider, among other things, the matters set forth in “Risk Factors” beginning on page FWP-7 of this free writing prospectus, page S-3 of the prospectus supplement and page S-2 of the ETF Underlying Supplement, as the securities involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisors before you invest in the securities. As used herein, references to the “Issuer”, “HSBC”, “we”, “us” and “our” are to HSBC USA Inc.
HSBC has filed a registration statement (including a prospectus, a prospectus supplement and underlying supplements) with the SEC for the offering to which this free writing prospectus relates. Before you invest, you should read the prospectus, prospectus supplement and relevant underlying supplement in that registration statement and other documents HSBC has filed with the SEC for more complete information about HSBC and this offering. You may get these documents for free by visiting EDGAR on the SEC’s web site at www.sec.gov. Alternatively, HSBC Securities (USA) Inc. or any dealer participating in this offering will arrange to send you the prospectus, prospectus supplement and ETF Underlying Supplement if you request them by calling toll-free 1-866-811-8049.
You may also obtain:
| } | The Prospectus Supplement at: http://www.sec.gov/Archives/edgar/data/83246/000104746912003151/a2208335z424b2.htm |
| } | The Prospectus at: http://www.sec.gov/Archives/edgar/data/83246/000104746912003148/a2208395z424b2.htm |
| } | The ETF Underlying Supplement at: http://www.sec.gov/Archives/edgar/data/83246/000114420412016689/v306692_424b2.htm |
We are using this free writing prospectus to solicit from you an offer to purchase the securities. You may revoke your offer to purchase the securities at any time prior to the time at which we accept your offer by notifying HSBC Securities (USA) Inc. We reserve the right to change the terms of, or reject any offer to purchase, the securities prior to their issuance. In the event of any material changes to the terms of the securities, we will notify you.
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PAYMENT AT MATURITY
On the Maturity Date, for each security you hold, we will pay you the Final Settlement Value, which is an amount in cash, as described below:
If the Reference Return is greater than zero, you will receive a cash payment on the Maturity Date, per $1,000 Principal Amount, equal to the lesser of:
(a) $1,000 + ($1,000 × Reference Return × Upside Participation Rate); and
(b) $1,000 + ($1,000 × Maximum Cap).
If the Reference Return is less than or equal to zero but greater than or equal to the Buffer Value, you will receive $1,000 per $1,000 Principal Amount (zero return).
If the Reference Return is less than the Buffer Value, you will receive a cash payment on the Maturity Date, per $1,000 Principal Amount, calculated as follows:
$1,000 + [$1,000 × (Reference Return + 25%) x Downside Leverage Factor].
Under these circumstances, you will lose 1.3333% of the Principal Amount of your securities for each percentage point that the Reference Return is below the Buffer Value. For example, if the Reference Return is -26%, you will suffer a 1.3333% loss and receive 98.6667% of the Principal Amount, subject to the credit risk of HSBC. You should be aware that if the Reference Return is less than the Buffer Value, you will lose up to 100% of your investment.
Interest
The securities will not pay interest.
Business Day
A “business day” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in the City of New York.
Payment When Offices or Settlement Systems Are Closed
If any payment is due on the securities on a day that would otherwise be a “business day” but is a day on which the office of a paying agent or a settlement system is closed, we will make the payment on the next business day when that paying agent or system is open. Any such payment will be deemed to have been made on the original due date, and no additional payment will be made on account of the delay.
Calculation Agent
We or one of our affiliates will act as calculation agent with respect to the securities.
Reference Issuer
iShares, Inc. is the reference issuer.
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INVESTOR SUITABILITY
The securities may be suitable for you if:
| } | You seek an investment with an enhanced return linked to the potential positive performance of the Reference Asset and you believe the price of the Reference Asset will increase over the term of the securities. |
| } | You are willing to invest in the securities based on the Maximum Cap indicated herein, which may limit your return at maturity. The actual Maximum Cap will be determined on the Pricing Date. |
| } | You are willing to make an investment that is exposed to the negative Reference Return on a 1.3333-to-1 basis for each percentage point that the Reference Return is less than -25%. |
| } | You are willing to accept the risk and return profile of the securities versus a conventional debt security with a comparable maturity issued by HSBC or another issuer with a similar credit rating. |
| } | You are willing to forgo dividends or other distributions paid to holders of the Reference Asset. |
| } | You do not seek current income from your investment. |
| } | You do not seek an investment for which there is an active secondary market. |
| } | You are willing to hold the securities to maturity. |
| } | You are comfortable with the creditworthiness of HSBC, as Issuer of the securities. |
The securities may not be suitable for you if:
| } | You believe the Reference Return will be negative on the Final Valuation Date or that the Reference Return will not be sufficiently positive to provide you with your desired return. |
| } | You are unwilling to invest in the securities based on the Maximum Cap indicated herein, which may limit your return at maturity. The actual Maximum Cap will be determined on the Pricing Date. |
| } | You are unwilling to make an investment that is exposed to the negative Reference Return on a 1.3333-to-1 basis for each percentage point that the Reference Return is less than -25%. |
| } | You seek an investment that provides full return of principal. |
| } | You prefer the lower risk, and therefore accept the potentially lower returns, of conventional debt securities with comparable maturities issued by HSBC or another issuer with a similar credit rating. |
| } | You prefer to receive the dividends or other distributions paid on the Reference Asset. |
| } | You seek current income from your investment. |
| } | You seek an investment for which there will be an active secondary market. |
| } | You are unable or unwilling to hold the securities to maturity. |
| } | You are not willing or are unable to assume the credit risk associated with HSBC, as Issuer of the securities. |
RISK FACTORS
We urge you to read the section “Risk Factors” beginning on page S-3 in the accompanying prospectus supplement and page S-2 of the ETF Underlying Supplement. Investing in the securities is not equivalent to investing directly in the Reference Asset. You should understand the risks of investing in the securities and should reach an investment decision only after careful consideration, with your advisors, of the suitability of the securities in light of your particular financial circumstances and the information set forth in this free writing prospectus and the accompanying prospectus supplement, prospectus and ETF Underlying Supplement.
In addition to the risks discussed below, you should review “Risk Factors” in the accompanying prospectus supplement and ETF Underlying Supplement including the explanation of risks relating to the securities described in the following sections:
| } | “— Risks Relating to All Note Issuances” in the prospectus supplement; and |
| } | “— General Risks Related to Index Funds” in the ETF Underlying Supplement. |
You will be subject to significant risks not associated with conventional fixed-rate or floating-rate debt securities.
Your investment in the securities may result in a loss.
You will be exposed on a leveraged basis to the decline in the Final Price from the Initial Price beyond the Buffer Value of -25%, which will magnify your losses. Accordingly, if the Reference Return is less than -25%, your Payment at Maturity will be less than the Principal Amount of your securities. You will lose up to 100% of your investment at maturity if the Reference Return is less than the Buffer Value.
The appreciation on the securities is limited by the Maximum Cap.
You will not participate in any appreciation in the price of the Reference Asset (as multiplied by the Upside Participation Rate) beyond the Maximum Cap. The Maximum Cap (to be determined on the Pricing Date) will be between 55% and 65%. You will not receive a return on the securities greater than the Maximum Cap.
| FWP-7 |
The amount payable on the securities is not linked to the price of the Reference Asset at any time other than on the Final Valuation Date.
The Final Price will be based on the Official Closing Price of the Reference Asset on the Final Valuation Date, subject to postponement for non-trading days and certain market disruption events. Even if the price of the Reference Asset appreciates prior to the Final Valuation Date but then decreases on the Final Valuation Date to a level that is below the Initial Price, the Payment at Maturity will be less, and may be significantly less, than it would have been had the Payment at Maturity been linked to the price of the Reference Asset prior to such decrease. Although the actual price of the Reference Asset on the Maturity Date or at other times during the term of the securities may be higher than the Final Price, the Payment at Maturity will be based solely on the Official Closing Price of the Reference Asset on the Final Valuation Date.
Credit risk of HSBC USA Inc.
The securities are senior unsecured debt obligations of the Issuer, HSBC, and are not, either directly or indirectly, an obligation of any third party. As further described in the accompanying prospectus supplement and prospectus, the securities will rank on par with all of the other unsecured and unsubordinated debt obligations of HSBC, except such obligations as may be preferred by operation of law. Any payment to be made on the securities, including any return of principal at maturity, depends on the ability of HSBC to satisfy its obligations as they come due. As a result, the actual and perceived creditworthiness of HSBC may affect the market value of the securities and, in the event HSBC were to default on its obligations, you may not receive the amounts owed to you under the terms of the securities.
The securities will not bear interest.
As a holder of the securities, you will not receive interest payments.
Changes that affect the Reference Asset or the MSCI Emerging Markets Index may affect the price of the Reference Asset and the market value of the securities and the amount you will receive at maturity.
The policies of reference issuer or MSCI, Inc. (the “Index Sponsor”), the index sponsor of the MSCI Emerging Markets Index (the “Underlying Index”), concerning additions, deletions and substitutions of the constituents comprising the Reference Asset or the Underlying Index, as applicable, and the manner in which the reference issuer or the Index Sponsor takes account of certain changes affecting those constituents included in the Reference Asset or the Underlying Index may affect the price of the Reference Asset. The policies of the reference issuer or the Index Sponsor with respect to the calculation of the Reference Asset or the Underlying Index, as applicable, could also affect the price of the Reference Asset. The reference issuer or the Index Sponsor may discontinue or suspend calculation or dissemination of the Reference Asset or the Underlying Index, as applicable. Any such actions could affect the price of the Reference Asset and the value of the securities.
The securities are not insured or guaranteed by any governmental agency of the United States or any other jurisdiction.
The securities are not deposit liabilities or other obligations of a bank and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency or program of the United States or any other jurisdiction. An investment in the securities is subject to the credit risk of HSBC, and in the event that HSBC is unable to pay its obligations as they become due, you may not receive the full Payment at Maturity of the securities.
Certain built-in costs are likely to adversely affect the value of the securities prior to maturity.
While the Payment at Maturity described in this free writing prospectus is based on the full Principal Amount of your securities, the original issue price of the securities includes the agent’s commission and the estimated cost of HSBC hedging its obligations under the securities. As a result, the price, if any, at which HSBC Securities (USA) Inc. will be willing to purchase securities from you in secondary market transactions, if at all, will likely be lower than the original issue price, and any sale prior to the Maturity Date could result in a substantial loss to you. The securities are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your securities to maturity.
The securities lack liquidity.
The securities will not be listed on any securities exchange. HSBC Securities (USA) Inc. is not required to offer to purchase the securities in the secondary market, if any exists. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the securities easily. Because other dealers are not likely to make a secondary market for the securities, the price at which you may be able to trade your securities is likely to depend on the price, if any, at which HSBC Securities (USA) Inc. is willing to buy the securities.
Potential conflicts of interest may exist.
HSBC and its affiliates play a variety of roles in connection with the issuance of the securities, including acting as calculation agent and hedging our obligations under the securities. In performing these duties, the economic interests of the calculation agent and other
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affiliates of ours are potentially adverse to your interests as an investor in the securities. We will not have any obligation to consider your interests as a holder of the securities in taking any action that might affect the value of your securities.
Uncertain tax treatment.
For a discussion of the U.S. federal income tax consequences of your investment in a security, please see the discussion under “U.S. Federal Income Tax Considerations” herein and the discussion under “U.S. Federal Income Tax Considerations” in the accompanying prospectus supplement.
Risks associated with non-U.S. companies.
The values of the EEM depends upon the stocks of non-U.S. companies, and thus involve risks associated with the home countries of those non-U.S. companies. The prices of these non-U.S. stocks may be affected by political, economic, financial and social factors in the home country of each applicable company, including changes in that country’s government, economic and fiscal policies, currency exchange laws or other laws or restrictions, which could affect the value of the securities. These foreign securities may have less liquidity and could be more volatile than many of the securities traded in U.S. or other securities markets. Direct or indirect government intervention to stabilize the relevant foreign securities markets, as well as cross shareholdings in foreign companies, may affect trading levels or prices and volumes in those markets. The other special risks associated with foreign securities may include, but are not limited to: less liquidity and smaller market capitalizations; less rigorous regulation of securities markets; different accounting and disclosure standards; governmental interference; currency fluctuations; higher inflation; and social, economic and political uncertainties. These factors may adversely affect the performance of the EEM and, as a result, the value of the securities.
Risks associated with emerging markets.
An investment in the securities will involve risks not generally associated with investments which have no emerging market component. In particular, many emerging nations are undergoing rapid change, involving the restructuring of economic, political, financial and legal systems. Regulatory and tax environments may be subject to change without review or appeal. Many emerging markets suffer from underdevelopment of capital markets and tax regulation. The risk of expropriation and nationalization remains a threat. Guarding against such risks is made more difficult by low levels of corporate disclosure and unreliability of economic and financial data.
The securities will not be adjusted for changes in exchange rates.
Although the equity securities held by the EEM are traded in currencies other than U.S. dollars, and your securities are denominated in U.S. dollars, the amount payable on your securities at maturity, if any, will not be adjusted for changes in the exchange rates between the U.S. dollar and the currencies in which these non-U.S. equity securities are denominated. Changes in exchange rates, however, may also reflect changes in the applicable non-U.S. economies that in turn may affect the value of the EEM, and therefore your securities. The amount we pay in respect of your securities on the maturity date, if any, will be determined solely in accordance with the procedures described in this free writing prospectus.
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ILLUSTRATIVE EXAMPLES
The following table and examples are provided for illustrative purposes only and are hypothetical. They do not purport to be representative of every possible scenario concerning increases or decreases in the price of the Reference Asset relative to its Initial Price. We cannot predict the Final Price of the Reference Asset. The assumptions we have made in connection with the illustrations set forth below may not reflect actual events. You should not take this illustration or these examples as an indication or assurance of the expected performance of the Reference Asset to which your securities are linked or the return on your securities. The Final Settlement Value may be less than the amount that you would have received from a conventional debt security with the same stated maturity, including those issued by HSBC. The numbers appearing in the table below and following examples have been rounded for ease of analysis.
The table below illustrates the Payment at Maturity on a $1,000 investment in the securities for a hypothetical range of Reference Returns from -100% to +100%. The following results are based solely on the assumptions outlined below. The “Hypothetical Return on the Securities” as used below is the number, expressed as a percentage, that results from comparing the Payment at Maturity per $1,000 Principal Amount of securities to $1,000. The potential returns described here assume that your securities are held to maturity. You should consider carefully whether the securities are suitable to your investment goals. The numbers appearing in the following table and examples have been rounded for ease of analysis. The following table and examples assume the following:
| } | Principal Amount: | $1,000 |
| } | Upside Participation Rate: | 111% |
| } | Downside Leverage Factor: | 1.3333 |
| } | Buffer Value: | -25% |
| } | Hypothetical Maximum Cap: | 55% (The actual Maximum Cap will be determined on the Pricing Date and will be between 55% and 65%). |
The actual Initial Price and Maximum Cap will be determined on the Pricing Date.
| Hypothetical Reference Return | Hypothetical Payment at Maturity | Hypothetical Return on the Securities |
| 100.00% | $1,550.00 | 55.00% |
| 80.00% | $1,550.00 | 55.00% |
| 60.00% | $1,550.00 | 55.00% |
| 50.00% | $1,550.00 | 55.00% |
| 40.00% | $1,444.00 | 44.40% |
| 20.00% | $1,222.00 | 22.20% |
| 15.00% | $1,166.50 | 16.65% |
| 10.00% | $1,444.00 | 44.40% |
| 5.00% | $1,055.50 | 5.55% |
| 0.00% | $1,000.00 | 0.00% |
| -10.00% | $1,000.00 | 0.00% |
| -15.00% | $1,000.00 | 0.00% |
| -20.00% | $1,000.00 | 0.00% |
| -25.00% | $1,000.00 | 0.00% |
| -30.00% | $933.33 | -6.67% |
| -40.00% | $800.00 | -20.00% |
| -60.00% | $533.33 | -46.67% |
| -80.00% | $266.67 | -73.33% |
| -100.00% | $0.00 | -100.00% |
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The following examples indicate how the Final Settlement Value would be calculated with respect to a hypothetical $1,000 investment in the securities.
Example 1: The Reference Return is 5.00%.
| Reference Return: | 5.00% |
| Final Settlement Value: | $1,055.50 |
Because the Reference Return is positive, and the Reference Return multiplied by the Upside Participation Rate is less than the hypothetical Maximum Cap, the Final Settlement Value would be $1,055.50 per $1,000 Principal Amount, calculated as follows:
$1,000 + ($1,000 × Reference Return × Upside Participation Rate)
= $1,000 + ($1,000 × 5.00% × 111%)
= $1,055.50
Example 1 shows that you will receive the return of your principal investment plus a return equal to the Reference Return multiplied by 111% when the Reference Return is positive and, as multiplied by the Upside Participation Rate, equal to or less than the Maximum Cap.
Example 2: The Reference Return is 50.00%.
| Reference Return: | 50.00% |
| Final Settlement Value: | $1,550.00 |
Because the Reference Return is positive, and the Reference Return multiplied by the Upside Participation Rate is greater than the hypothetical Maximum Cap, the Final Settlement Value would be $1,550.00 per $1,000 Principal Amount, calculated as follows:
$1,000 + ($1,000 × Maximum Cap)
= $1,000 + ($1,000 × 55.00%)
= $1,550.00
Example 2 shows that you will receive the return of your principal investment plus a return equal to the Maximum Cap when the Reference Return is positive and the Reference Return multiplied by 111% exceeds the Maximum Cap.
Example 3: The Reference Return is -5.00%.
| Reference Return: | -5.00% |
| Final Settlement Value: | $1,000.00 |
Because the Reference Return is less than zero but greater than the Buffer Value of -25%, the Final Settlement Value would be $1,000.00 per $1,000 Principal Amount (a zero return).
Example 3 shows that you will receive the return of your principal investment where the price of the Reference Asset declines by no more than 25% over the term of the securities.
Example 4: The Reference Return is -30.00%.
| Reference Return: | -30.00% | |
| Final Settlement Value: | $933.33 | |
Because the Reference Return is less than the Buffer Value of -25%, the Final Settlement Value would be $933.33 per $1,000 Principal Amount, calculated as follows:
$1,000 + [$1,000 × (Reference Return + 25%) × Downside Leverage Factor]
= $1,000 + [$1,000 × (-30.00% + 25%) × 1.3333]
= $933.33
Example 4 shows that you are exposed on a 1.3333-to-1 basis to declines in the price of the Reference Asset beyond the Buffer Value of -25%. YOU MAY LOSE UP TO 100% OF THE PRINCIPAL AMOUNT OF YOUR SECURITIES.
| FWP-11 |
INFORMATION RELATING TO THE REFERENCE ASSET
|
Description of the EEM
The EEM seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI Emerging Markets Index. The MSCI Emerging Markets Index is intended to measure the performance of equity markets in the global emerging markets. As of April 30, 2013, the MSCI Emerging Markets Index consisted of the following 21 component country indices: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey.
For more information about the EEM, see “The iSharesÒ MSCI Emerging Markets Index Fund” beginning on page S-21 of the accompanying ETF Underlying Supplement. |
Historical Performance of the EEM
The following graph sets forth the historical performance of the EEM based on the daily historical closing prices from May 20, 2008 through May 20, 2013. The closing price for the EEM on May 20, 2013 was $43.53. We obtained the closing prices below from the Bloomberg Professional® service. We have not undertaken any independent review of, or made any due diligence inquiry with respect to, the information obtained from the Bloomberg Professional® service.
|
| The historical prices of the EEM should not be taken as an indication of future performance, and no assurance can be given as to the Official Closing Value of the EEM on the Final Valuation Date. | |
| Quarter Begin | Quarter End | Quarterly High | Quarterly Low | Quarterly Close |
| 1/2/2008 | 3/31/2008 | $50.69 | $40.63 | $44.74 |
| 4/1/2008 | 6/30/2008 | $52.42 | $44.38 | $45.14 |
| 7/1/2008 | 9/30/2008 | $44.71 | $30.84 | $34.49 |
| 10/1/2008 | 12/31/2008 | $34.25 | $18.20 | $24.94 |
| 1/2/2009 | 3/31/2009 | $27.25 | $19.85 | $24.78 |
| 4/1/2009 | 6/30/2009 | $34.84 | $24.69 | $32.19 |
| 7/1/2009 | 9/30/2009 | $39.46 | $30.21 | $38.86 |
| 10/1/2009 | 12/31/2009 | $42.47 | $37.26 | $41.46 |
| 1/4/2010 | 3/31/2010 | $43.43 | $34.98 | $42.08 |
| 4/1/2010 | 6/30/2010 | $43.98 | $35.18 | $37.29 |
| 7/1/2010 | 9/30/2010 | $44.95 | $36.73 | $44.73 |
| 10/1/2010 | 12/31/2010 | $48.58 | $44.47 | $47.60 |
| 1/3/2011 | 3/31/2011 | $48.73 | $44.24 | $48.67 |
| 4/1/2011 | 6/30/2011 | $50.41 | $44.76 | $47.58 |
| 7/1/2011 | 9/30/2011 | $48.61 | $34.69 | $35.06 |
| 10/3/2011 | 12/30/2011 | $43.20 | $33.42 | $37.93 |
| 1/3/2012 | 3/30/2012 | $44.89 | $38.20 | $42.93 |
| 4/2/2012 | 6/29/2012 | $43.74 | $36.56 | $39.18 |
| 7/2/2012 | 9/28/2012 | $42.82 | $37.14 | $41.31 |
| 10/1/2012 | 12/31/2012 | $44.42 | $39.92 | $44.35 |
| 1/2/2013 | 3/29/2013 | $45.28 | $41.72 | $42.78 |
| 4/1/2013* | 5/20/2013* | $44.26 | $40.76 | $43.53 |
* This free writing prospectus includes information for the second calendar quarter of 2013 for the period from April 1, 2013 through May 20, 2013. Accordingly, the “Quarterly High,” “Quarterly Low” and “Quarterly Close” data indicated are for this shortened period only and do not reflect complete data for the second calendar quarter of 2013.
| FWP-12 |
SUPPLEMENTAL PLAN OF DISTRIBUTION (CONFLICTS OF INTEREST)
We have appointed HSBC Securities (USA) Inc., an affiliate of HSBC, as the agent for the sale of the securities. Pursuant to the terms of a distribution agreement, HSBC Securities (USA) Inc. will purchase the securities from HSBC at the price to public less the underwriting discount set forth on the cover page of the pricing supplement to which this free writing prospectus relates, for distribution to other registered broker-dealers, or will offer the securities directly to investors. HSBC Securities (USA) Inc. proposes to offer the securities at the price to public set forth on the cover page of this free writing prospectus. Neither HSBC USA Inc. nor any of its affiliates will pay any underwriting discounts.
An affiliate of HSBC has paid or may pay in the future an amount to broker-dealers in connection with the costs of the continuing implementation of systems to support the securities.
In addition, HSBC Securities (USA) Inc. or another of its affiliates or agents may use the pricing supplement to which this free writing prospectus relates in market-making transactions after the initial sale of the securities, but is under no obligation to do so and may discontinue any market-making activities at any time without notice.
See “Supplemental Plan of Distribution (Conflicts of Interest)” on page S-49 in the prospectus supplement.
U.S. FEDERAL INCOME TAX CONSIDERATIONS
There is no direct legal authority as to the proper tax treatment of the securities, and therefore significant aspects of the tax treatment of the securities are uncertain as to both the timing and character of any inclusion in income in respect of the securities. Under one approach, a security should be treated as a pre-paid executory contract with respect to the Reference Asset. We intend to treat the securities consistent with this approach. Pursuant to the terms of the securities, you agree to treat the securities under this approach for all U.S. federal income tax purposes. Subject to the limitations described therein, and based on certain factual representations received from us, in the opinion of our special U.S. tax counsel, Morrison & Foerster LLP, it is reasonable to treat a security as a pre-paid executory contract with respect to the Reference Asset. Pursuant to this approach and subject to the discussion below regarding “constructive ownership transactions”, we do not intend to report any income or gain with respect to the securities prior to their maturity or an earlier sale or exchange and we intend to treat any gain or loss upon maturity or an earlier sale or exchange as long-term capital gain or loss, provided that you have held the security for more than one year at such time for U.S. federal income tax purposes.
Despite the foregoing, U.S. holders (as defined under “U.S. Federal Income Tax Considerations” in the accompanying prospectus supplement) should be aware that the Internal Revenue Code of 1986, as amended (the “Code”), contains a provision, Section 1260 of the Code, which sets forth rules which are applicable to what it refers to as “constructive ownership transactions.” Due to the manner in which it is drafted, the precise applicability of Section 1260 of the Code to any particular transaction is often uncertain. In general, a “constructive ownership transaction” includes a contract under which an investor will receive payment equal to or credit for the future value of any equity interest in a regulated investment company (such as shares of the EEM (the “Underlying Shares”)). Under the “constructive ownership” rules, if an investment in the securities is treated as a “constructive ownership transaction,” any long-term capital gain recognized by a U.S. holder in respect of a security will be recharacterized as ordinary income to the extent such gain exceeds the amount of “net underlying long-term capital gain” (as defined in Section 1260 of the Code) of the U.S. holder determined as if the U.S. holder had acquired the Underlying Shares on the original issue date of the security at fair market value and sold them at fair market value on the Maturity Date (if the security was held until the Maturity Date) or on the date of sale or exchange of the security (if the security was sold or exchanged prior to the Maturity Date) (the “Excess Gain”). In addition, an interest charge will also apply to any deemed underpayment of tax in respect of any Excess Gain to the extent such gain would have resulted in gross income inclusion for the U.S. holder in taxable years prior to the taxable year of the sale, exchange or maturity of the security (assuming such income accrued at a constant rate equal to the applicable federal rate as of the date of sale, exchange or maturity of the security).
Although the matter is not clear, there exists a risk that an investment in the securities will be treated as a “constructive ownership transaction.” If such treatment applies, it is not entirely clear to what extent any long-term capital gain recognized by a U.S. holder in respect of the securities will be recharacterized as ordinary income. It is possible, for example, that the amount of the Excess Gain (if any) that would be recharacterized as ordinary income in respect of each security will equal the excess of (i) any long-term capital gain recognized by the U.S. holder in respect of such a security over (ii) the “net underlying long-term capital gain” such U.S. holder would have had if such U.S. holder had acquired a number of the Underlying Shares at fair market value on the original issue date of such security for an amount equal to the “issue price” of the security and, upon the date of sale, exchange or maturity of the security, sold such Underlying Shares at fair market value (which would reflect the percentage increase in the value of the Underlying Shares over the term of the security). Accordingly, U.S. holders should consult their tax advisors regarding the potential application of the “constructive ownership” rules.
We will not attempt to ascertain whether any of the entities whose stock is included in, or owned by, the Reference Asset, as the case may be, would be treated as a passive foreign investment company (“PFIC”) or United States real property holding corporation (“USRPHC”), both as defined for U.S. federal income tax purposes. If one or more of the entities whose stock is included in, or owned by, the Reference Asset, as the case may be, were so treated, certain adverse U.S. federal income tax consequences might apply. You
| FWP-13 |
should refer to information filed with the SEC and other authorities by the entities whose stock is included in, or owned by, the Reference Asset, as the case may be, and consult your tax advisor regarding the possible consequences to you if one or more of the entities whose stock is included in, or owned by, the Reference Asset, as the case may be, is or becomes a PFIC or a USRPHC.
Withholding and reporting requirements under the legislation enacted on March 18, 2010 (as discussed beginning on page S-48 of the prospectus supplement) will generally apply to payments made after December 31, 2013. However, this withholding tax will not be imposed on payments pursuant to obligations outstanding on January 1, 2014. Additionally, withholding due to any payment being treated as a “dividend equivalent” (as discussed beginning on page S-47 of the prospectus supplement) will begin no earlier than January 1, 2014. Holders are urged to consult with their own tax advisors regarding the possible implications of this recently enacted legislation on their investment in the securities.
For a discussion of the U.S. federal income tax consequences of your investment in a security, please see the discussion under “U.S Federal Income Tax Considerations” in the accompanying prospectus supplement.
| FWP-14 |
| TABLE OF CONTENTS |
You should only rely on the information contained in this free writing prospectus, any accompanying underlying supplement, prospectus supplement and prospectus. We have not authorized anyone to provide you with information or to make any representation to you that is not contained in this free writing prospectus, any accompanying underlying supplement, prospectus supplement and prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. This free writing prospectus, any accompanying underlying supplement, prospectus supplement and prospectus are not an offer to sell these securities, and these documents are not soliciting an offer to buy these securities, in any jurisdiction where the offer or sale is not permitted. You should not, under any circumstances, assume that the information in this free writing prospectus, any accompanying underlying supplement, prospectus supplement and prospectus is correct on any date after their respective dates.
HSBC USA Inc.
$ Buffered Accelerated Market Participation Securities Linked to the iShares® MSCI Emerging Markets Index Fund
May 24, 2013
FREE WRITING PROSPECTUS
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| Free Writing Prospectus | |||
| General | FWP-5 | ||
| Payment at Maturity | FWP-6 | ||
| Investor Suitability | FWP-7 | ||
| Risk Factors | FWP-7 | ||
| Illustrative Examples | FWP-10 | ||
| Information Relating to the Reference Asset | FWP-12 | ||
| Supplemental Plan of Distribution (Conflicts of Interest) | FWP-13 | ||
| U.S. Federal Income Tax Considerations | FWP-13 | ||
| ETF Underlying Supplement | |||
| Risk Factors | S-2 | ||
| Reference Sponsors | S-8 | ||
| The SPDR® Dow Jones Industrial AverageSM ETF Trust | S-8 | ||
| The POWERSHARES QQQ TRUSTSM, SERIES 1 | S-11 | ||
| The iShares® MSCI Mexico Investable Market Index Fund | S-15 | ||
| The iShares® MSCI Brazil Index Fund | S-18 | ||
| The iShares® MSCI Emerging Markets Index Fund | S-21 | ||
| The iShares® MSCI EAFE Index Fund | S-24 | ||
| The SPDR S&P 500 ETF Trust | S-26 | ||
| The Market Vectors Gold Miners ETF | S-30 | ||
| The iShares® Dow Jones U.S. Real Estate Index Fund | S-33 | ||
| The iShares® FTSE China 25 Index Fund | S-36 | ||
| The iShares® S&P Latin America 40 Index Fund | S-39 | ||
| The Financial Select Sector SPDR® Fund | S-42 | ||
| The iShares® Dow Jones Transportation Average Index Fund | S-45 | ||
| The Energy Select SPDR® Fund | S-47 | ||
| The Health Care Select SPDR® Fund | S-50 | ||
| Other Components | S-52 | ||
| Additional Terms of the Notes | S-52 | ||
| Prospectus Supplement | |||
| Risk Factors | S-3 | ||
| Risks Relating to Our Business | S-3 | ||
| Risks Relating to All Note Issuances | S-3 | ||
| Pricing Supplement | S-7 | ||
| Description of Notes | S-8 | ||
| Use of Proceeds and Hedging | S-30 | ||
| Certain ERISA Considerations | S-30 | ||
| U.S. Federal Income Tax Considerations | S-32 | ||
| Supplemental Plan of Distribution (Conflicts of Interest) | S-49 | ||
| Prospectus | |||
| About this Prospectus | 1 | ||
| Risk Factors | 1 | ||
| Where You Can Find More Information | 1 | ||
| Special Note Regarding Forward-Looking Statements | 2 | ||
| HSBC USA Inc. | 3 | ||
| Use of Proceeds | 3 | ||
| Description of Debt Securities | 3 | ||
| Description of Preferred Stock | 15 | ||
| Description of Warrants | 21 | ||
| Description of Purchase Contracts | 25 | ||
| Description of Units | 28 | ||
| Book-Entry Procedures | 30 | ||
| Limitations on Issuances in Bearer Form | 35 | ||
| U.S. Federal Income Tax Considerations Relating to Debt Securities | 35 | ||
| Plan of Distribution (Conflicts of Interest) | 51 | ||
| Notice to Canadian Investors | 53 | ||
| Notice to EEA Investors | 58 | ||
| Certain ERISA Matters | 59 | ||
| Legal Opinions | 60 | ||
| Experts | 60 | ||