Filed Pursuant to Rule 433
Registration No. 333-202524
March 19, 2015
FREE WRITING PROSPECTUS
(To Prospectus dated March 5, 2015,
Prospectus Supplement dated March 5, 2015 and
ETF Underlying Supplement dated March 5, 2015)
HSBC USA Inc.
Barrier Accelerated Market Participation
SecuritiesTM (“Barrier AMPS”)
| ► | Barrier AMPSTM linked to the Energy Select Sector SPDR® Fund |
| ► | Maturity of three years |
| ► | 1.5x exposure to any positive return of the reference asset, subject to a maximum return |
| ► | Contingent repayment of principal if the reference asset does not decrease by more than 25% |
| ► | Full exposure to declines in the reference asset if the return is less than -25% |
| ► | All payments on the securities are subject to the credit risk of HSBC USA Inc. |
The Barrier Accelerated Market Participation SecuritiesTM (“Barrier 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-15 of this free writing prospectus.
The Estimated Initial Value of the securities on the Pricing Date is expected to be between $920 and $970 per security, which will be less than the price to public. The market value of the securities at any time will reflect many factors and cannot be predicted with accuracy. See “Estimated Initial Value” on page FWP-4 and “Risk Factors” beginning on page FWP-7 of this document for additional information.
Investment in the securities involves certain risks. You should refer to “Risk Factors” beginning on page FWP-7 of this document, page S-1 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 HSBC USA Inc. or one of our affiliates may pay varying underwriting discounts of up to 1.50% per $1,000 Principal Amount in connection with the distribution of the securities to other registered broker-dealers. See “Supplemental Plan of Distribution (Conflicts of Interest)” on page FWP-15 of this free writing prospectus.
The Securities:
| Are Not FDIC Insured | Are Not Bank Guaranteed | May Lose Value |
HSBC USA Inc.
Barrier Accelerated Market Participation SecuritiesTM (Barrier AMPS) Linked to the Energy Select Sector SPDR® Fund
Indicative Terms*
| Principal Amount | $1,000 per security |
| Reference Asset | The Energy Select Sector SPDR® Fund (“XLE”) |
| Term | Three years |
| Barrier Level | -25% |
| Upside Participation Rate | 150% (1.5x) exposure to any positive Reference Return, subject to the Maximum Cap |
| Payment at Maturity per Security |
If the 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 x Maximum Cap)
If the Reference Return is less than or equal to zero but greater than or equal to the Barrier Level: $1,000 (zero return).
If the Reference Return is less than the Barrier Level: $1,000 + ($1,000 × Reference Return).
If the Reference Return is less than the Barrier Level, you will lose some or all of your investment. |
| Reference Return |
Final Price – Initial Price Initial Price |
| Maximum Cap | At least 47% (to 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 | March [ ], 2015 |
| Trade Date | March [ ], 2015 |
| Original Issue Date | March [ ], 2015 |
| Final Valuation Date | March [ ], 2018 |
| Maturity Date | March [ ], 2018 |
| CUSIP/ISIN | 40433BN38 / US40433BN386 |
* As more fully described beginning on page FWP-4.
The Barrier AMPSTM
The Barrier AMPS are designed for investors who believe the Reference Asset will appreciate over the term of the Barrier AMPS. If the Reference Return is less than zero but equal to or greater than -25%, you will receive your principal amount. If the Reference Asset declines by more than 25%, you will lose 1% of your investment for every 1% decline in the Reference Asset.
If the Reference Asset appreciates over the term of the Barrier AMPS, you will realize a return equal to 150% of the Reference Asset’s appreciation, up to the Maximum Cap.
| The offering period for the Barrier AMPS is through March [ ], 2015 |
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Payoff Example
The table at right shows the hypothetical payout profile of an investment in the securities reflecting the Barrier Level of -25%, an Upside Participation Rate of 150%, and assuming a Maximum Cap of 47%. The actual Upside Participation Rate will be determined on the Pricing Date. |
 |
Information about the Reference Asset
| Energy Select Sector SPDR® Fund | ||
|
The XLE seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the S&P® Energy Select Sector Index. The S&P® Energy Select Sector Index measures the performance of the energy sector of the U.S. equity market. The S&P® Energy Select Sector Index seeks to represent the energy sector of the S&P 500® Index. The S&P® Energy Select Sector Index includes companies in the following industries: oil, gas and consumable fuels, and energy equipment and services.
|
 | |
The graph above illustrates the performance of the Reference Asset from January 1, 2008 through March 18, 2015. The closing prices in the graph above were obtained from the Bloomberg Professional® Service. Past performance is not necessarily an indication of future results. For further information on the Reference Asset, please see “Information Relating to the Reference Asset” on page FWP-12 of this free writing prospectus. 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.
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HSBC USA Inc. Barrier Accelerated Market Participation SecuritiesTM (Barrier AMPS) |
 |
Linked to the Energy Select Sector SPDR® Fund
This free writing prospectus relates to an offering of Barrier 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 -25%, lose up to 100% of your principal.
This free writing prospectus relates to an offering of securities linked to the performance of the Energy Select Sector SPDR® 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: | The Energy Select Sector SPDR® Fund (“XLE”) |
| Underlying Index: | The S&P® Energy Select Sector Index |
| Trade Date: | March [ ], 2015 |
| Pricing Date: | March [ ], 2015 |
| Original Issue Date: | March [ ], 2015 |
| Final Valuation Date: | March [ ], 2018, 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 March [ ], 2018. 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 Barrier Level, you will receive $1,000 per $1,000 Principal Amount (zero return).
If the Reference Return is less than the Barrier Level, you will receive a cash payment on the Maturity Date, per $1,000 Principal Amount, calculated as follows: $1,000 + ($1,000 × Reference Return).
Under these circumstances, you will lose 1% of the Principal Amount of your securities for each percentage point that the Reference Return is less than 0%. If the Reference Return is less than the Barrier Level, you will lose some or all of your investment. |
| Barrier Level: | -25% |
| Upside Participation Rate: | 150% |
| Maximum Cap: | At least 47% (to 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. |
| Official Closing Price: | The closing price of the Reference Asset on any scheduled trading day as determined by the calculation agent based upon the price displayed on Bloomberg Professional® service page “XLE <EQUITY>”, or on any successor page on the Bloomberg Professional® service or any successor service, as applicable, adjusted by the Calculation Agent 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: | 40433BN38 / US40433BN386 |
| Estimated Initial Value: | The Estimated Initial Value of the securities will be less than the price you pay to purchase the securities. The Estimated Initial Value does not represent a minimum price at which we or any of our affiliates would be willing to purchase your securities in the secondary market, if any, at any time. The Estimated Initial Value will be calculated on the Pricing Date and will be set forth in the pricing supplement to which this free writing prospectus relates. See “Risk Factors — The Estimated Initial Value of the securities, which will be determined by us on the Pricing Date, will be less than the price to public and may differ from the market value of the securities in the secondary market, if any.” |
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.
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GENERAL
This free writing prospectus relates to a single offering of securities linked to the Reference Asset. 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 this offering and to reject orders in whole or in part. Although the offering of securities relates to the Reference Asset, 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 5, 2015, the prospectus supplement dated March 5, 2015 and the ETF Underlying Supplement dated March 5, 2015. 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-1 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 an underlying supplement) with the SEC for the offering to which this free writing prospectus relates. Before you invest, you should read the prospectus, prospectus supplement and the 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/83246/000114420415014311/v403645_424b2.htm |
| ► | The Prospectus at: http://www.sec.gov/Archives/edgar/data/83246/000119312515078931/d884345d424b3.htm |
| ► | The ETF Underlying Supplement at: http://www.sec.gov/Archives/edgar/data/83246/000114420415014329/v403640_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 Barrier Level, you will receive $1,000 per $1,000 Principal Amount (zero return).
If the Reference Return is less than the Barrier Level, you will receive a cash payment on the Maturity Date, per $1,000 Principal Amount, calculated as follows:
$1,000 + ($1,000 × Reference Return).
Under these circumstances, you will lose 1% of the Principal Amount of your securities for each percentage point that the Reference Return is less than 0%. You should be aware that if the Reference Return is less than the Barrier Level, you will lose some or all of your investment.
Interest
The securities will not pay interest.
Calculation Agent
We or one of our affiliates will act as calculation agent with respect to the securities.
Reference Issuer
Select
Sector SPDR Trust 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 value 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-to-1 basis if 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-to-1 basis if 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-1 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 fully exposed to the decline
in the Final Price from the Initial Price if the Reference Return is less than the Barrier Level of
-25%. Accordingly, if the Reference Return is less than -25%, your Payment at Maturity will be less than the Principal Amount of
your securities. You may lose up to 100% of your investment at maturity if the Reference Return is negative.
The appreciation on the securities is limited by the Maximum Cap.
You will not participate in any appreciation in the value of the Reference Asset (as multiplied by the Upside Participation Rate) beyond the Maximum Cap. You will not receive a return on the securities greater than the Maximum Cap. The Maximum Cap (to be determined on the Pricing Date) will be at least 47%.
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 during the term of the securities other than on the Final Valuation Date but then decreases on the Final Valuation Date to a price that is less than the Initial Price, the Payment at Maturity may 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
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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 Underlying 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 the reference issuer or S&P Dow Jones Indices LLC (the “Index Sponsor”), the index sponsor of 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.
The Estimated Initial Value of the securities, which will be determined by us on the Pricing Date, will be less than the price to public and may differ from the market value of the securities in the secondary market, if any.
The Estimated Initial Value of the securities will be calculated by us on the Pricing Date and will be less than the price to public. The Estimated Initial Value will reflect our internal funding rate, which is the borrowing rate we pay to issue market-linked securities, as well as the mid-market value of the embedded derivatives in the securities. This internal funding rate is typically lower than the rate we would use when we issue conventional fixed or floating rate debt securities. As a result of the difference between our internal funding rate and the rate we would use when we issue conventional fixed or floating rate debt securities, the Estimated Initial Value of the securities may be lower if it were based on the levels at which our fixed or floating rate debt securities trade in the secondary market. In addition, if we were to use the rate we use for our conventional fixed or floating rate debt issuances, we would expect the economic terms of the securities to be more favorable to you. We will determine the value of the embedded derivatives in the securities by reference to our or our affiliates’ internal pricing models. These pricing models consider certain assumptions and variables, which can include volatility and interest rates. Different pricing models and assumptions could provide valuations for the securities that are different from our Estimated Initial Value. These pricing models rely in part on certain forecasts about future events, which may prove to be incorrect. The Estimated Initial Value does not represent a minimum price at which we or any of our affiliates would be willing to purchase your securities in the secondary market (if any exists) at any time.
The price of your securities in the secondary market, if any, immediately after the Pricing Date will be less than the price to public.
The price to public takes into account certain costs. These costs, which will be used or retained by us or one of our affiliates, include the underwriting discount, our affiliates’ projected hedging profits (which may or may not be realized) for assuming risks inherent in hedging our obligations under the securities and the costs associated with structuring and hedging our obligations under the securities. If you were to sell your securities in the secondary market, if any, the price you would receive for your securities may be less than the price you paid for them because secondary market prices will not take into account these costs. The price of your securities in the secondary market, if any, at any time after issuance will vary based on many factors, including the price of the Reference Asset and changes in market conditions, and cannot be predicted with accuracy. The securities are not designed to be short-term trading instruments, and you
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should, therefore, be able and willing to hold the securities to maturity. Any sale of the securities prior to maturity could result in a loss to you.
If we were to repurchase your securities immediately after the Original Issue Date, the price you receive may be higher than the Estimated Initial Value of the securities.
Assuming that all relevant factors remain constant after the Original Issue Date, the price at which HSBC Securities (USA) Inc. may initially buy or sell the securities in the secondary market, if any, and the value that we may initially use for customer account statements, if we provide any customer account statements at all, may exceed the Estimated Initial Value on the Pricing Date for a temporary period expected to be approximately 17 months after the Original Issue Date. This temporary price difference may exist because, in our discretion, we may elect to effectively reimburse to investors a portion of the estimated cost of hedging our obligations under the securities and other costs in connection with the securities that we will no longer expect to incur over the term of the securities. We will make such discretionary election and determine this temporary reimbursement period on the basis of a number of factors, including the tenor of the securities and any agreement we may have with the distributors of the securities. The amount of our estimated costs which we effectively reimburse to investors in this way may not be allocated ratably throughout the reimbursement period, and we may discontinue such reimbursement at any time or revise the duration of the reimbursement period after the Original Issue Date of the securities based on changes in market conditions and other factors that cannot be predicted.
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 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.
Owning the securities is not the same as owning the Reference Asset or the stocks comprising the Underlying Index.
The return on your securities may not reflect the return you would realize if you actually owned the Reference Asset or stocks included in the Underlying Index. As a holder of the securities, you will not have voting rights or rights to receive dividends or other distributions or other rights that holders of the Reference Asset or the stocks included in the Underlying Index would have.
Risks associated with the energy sector.
The XLE invests in companies that develop and produce crude oil and natural gas and provide drilling and other energy resources production and distribution related services. Stock prices for these types of companies are affected by supply and demand both for their specific product or service and for energy products and services in general. The price of oil and gas, exploration and production spending, government regulation, world events and economic conditions will likewise affect the performance of these companies. The stock prices of oil service companies could be subject to wide fluctuations in response to a variety of factors, including the ability of the OPEC to set and maintain production levels and pricing, the level of production in non-OPEC countries, the demand for oil and gas, which is negatively impacted by economic downturns, the policies of various governments regarding exploration and development of oil and gas reserves, advances in exploration and development technology and the political environment of oil-producing regions. Correspondingly, securities of companies in the energy field are subject to swift price and supply fluctuations caused by events relating to international politics, energy conservation, the success of exploration projects, and tax and other governmental regulatory policies. Weak demand for the companies’ products or services or for energy products and services in general, as well as negative developments in these other areas, would adversely impact the performance of the XLE.
Risks associated with concentration of investment in a particular sector.
The equity securities held by the XLE are issued by companies that are in the following industries: oil, gas and consumable fuels and energy equipment and services. Consequently, the value of the securities may be subject to greater volatility and be more adversely affected by a single economic, environmental, political or regulatory occurrence affecting such industries than an investment linked to a
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more broadly diversified group of issuers. Stock prices for these types of companies are affected by supply and demand both for their specific product or service and for energy products and services in general.
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. 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 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 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 terms:
| } Principal Amount: | $1,000 |
| } Barrier Level: | -25% |
| } Upside Participation Rate: | 150% |
| } Hypothetical Maximum Cap: | 47% (The actual Maximum Cap will be at least 47%) |
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 |
| 100.000% | $1,470.00 | 47.00% |
| 80.000% | $1,470.00 | 47.00% |
| 60.000% | $1,470.00 | 47.00% |
| 50.000% | $1,470.00 | 47.00% |
| 31.333% | $1,470.00 | 47.00% |
| 30.000% | $1,450.00 | 45.00% |
| 20.000% | $1,300.00 | 30.00% |
| 15.000% | $1,225.00 | 22.50% |
| 10.000% | $1,150.00 | 15.00% |
| 5.000% | $1,075.00 | 7.50% |
| 0.000% | $1,000.00 | 0.00% |
| -10.000% | $1,000.00 | 0.00% |
| -20.000% | $1,000.00 | 0.00% |
| -25.000% | $1,000.00 | 0.00% |
| -30.000% | $700.00 | -30.00% |
| -40.000% | $600.00 | -40.00% |
| -50.000% | $500.00 | -50.00% |
| -60.000% | $400.00 | -60.00% |
| -80.000% | $200.00 | -80.00% |
| -100.000% | $0.00 | -100.00% |
| FWP-10 |
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: | $1,075.00 |
\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 $1,075.00 per $1,000 Principal Amount, calculated as follows:
$1,000 + ($1,000 × Reference Return × Upside Participation Rate)
= $1,000 + ($1,000 × 5.00% × 150.00%)
= $1,075.00
Example 1 shows that you will receive the return of your principal investment plus a return equal to the Reference Return multiplied by 150% when the Reference Return is positive and, as multiplied by the Upside Participation Rate, equal to or less than the hypothetical Maximum Cap.
Example 2: The Reference Return is 60.00%.
| Reference Return: | 60.00% |
| Final Settlement Value: | $1,470.00 |
Because the Reference Return is positive, and the Reference Return multiplied by the Upside Participation Rate is greater than the Maximum Cap, the Final Settlement Value would be $1,470.00 per $1,000 Principal Amount, calculated as follows:
$1,000 + ($1,000 × Maximum Cap)
= $1,000 + ($1,000 × 47%)
= $1,470.00
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 Barrier Level of -40%, the Final Settlement Value would be $1,000.00 per $1,000 Principal Amount (a zero return).
Example 2 shows that you will receive the return of your principal investment where the price of the Reference Asset declines by no more than 10% over the term of the securities.
Example 4: The Reference Return is -60.00%.
| Reference Return: | -60.00% | |
| Final Settlement Value: | $400.00 | |
Because the Reference Return is less than the Barrier Level of -40%, the Final Settlement Value would be $400.00 per $1,000 Principal Amount, calculated as follows:
$1,000 + ($1,000 × Reference Return)
= $1,000 + ($1,000 × -60.00%)
= $400.00
Example 3 shows that you are fully exposed on a 1-to-1 basis to declines in the price of the Reference Asset if the Reference Return is less than the Barrier Level of -40%. YOU MAY LOSE UP TO 100% OF THE PRINCIPAL AMOUNT OF YOUR SECURITIES.
| FWP-11 |
INFORMATION RELATING TO THE REFERENCE ASSET
The XLE seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the S&P® Energy Select Sector Index. The S&P® Energy Select Sector Index measures the performance of the energy sector of the U.S. equity market. The S&P® Energy Select Sector Index seeks to represent the energy sector of the S&P 500® Index. The S&P® Energy Select Sector Index includes companies in the following industries: oil, gas and consumable fuels, and energy equipment and services.
For more information about the XLE, see “Energy Select Sector SPDR® Fund” beginning on page S-47 of the accompanying ETF Underlying Supplement.
Historical Performance of the XLE
The following graph sets forth the historical performance of the Reference Asset based on the daily historical closing prices from January 1, 2008 to March 18, 2015, as reported on 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 Reference Asset should not be taken as an indication of future performance.
| Quarter Begin | Quarter End |
(Intraday) Quarterly High |
(Intraday) Quarterly Low |
Quarterly Close |
| 1/2/2008 | 3/31/2008 | $80.74 | $62.97 | $73.80 |
| 4/1/2008 | 6/30/2008 | $91.42 | $73.35 | $88.36 |
| 7/1/2008 | 9/30/2008 | $90.15 | $59.13 | $63.77 |
| 10/1/2008 | 12/31/2008 | $63.43 | $38.85 | $47.84 |
| 1/2/2009 | 3/31/2009 | $53.18 | $37.40 | $42.46 |
| 4/1/2009 | 6/30/2009 | $54.82 | $41.48 | $48.07 |
| 7/1/2009 | 9/30/2009 | $56.28 | $43.66 | $53.92 |
| 10/1/2009 | 12/31/2009 | $60.56 | $51.34 | $57.01 |
| 1/4/2010 | 3/31/2010 | $60.87 | $52.68 | $57.52 |
| 4/1/2010 | 6/30/2010 | $62.29 | $49.58 | $49.68 |
| 7/1/2010 | 9/30/2010 | $56.75 | $48.56 | $56.06 |
| 10/1/2010 | 12/31/2010 | $68.49 | $55.68 | $68.25 |
| 1/3/2011 | 3/31/2011 | $80.96 | $67.50 | $79.81 |
| 4/1/2011 | 6/30/2011 | $80.89 | $70.45 | $75.35 |
| 7/1/2011 | 9/30/2011 | $79.97 | $57.96 | $58.59 |
| 10/3/2011 | 12/30/2011 | $73.19 | $54.26 | $69.13 |
| 1/3/2012 | 3/30/2012 | $76.49 | $68.75 | $71.73 |
| 4/2/2012 | 6/29/2012 | $72.99 | $61.11 | $66.37 |
| 7/2/2012 | 9/28/2012 | $77.35 | $64.64 | $73.48 |
| 10/1/2012 | 12/31/2012 | $75.19 | $67.78 | $71.44 |
| 1/2/2013 | 3/28/2013 | $80.13 | $72.00 | $79.32 |
| 4/1/2013 | 6/28/2013 | $83.95 | $73.53 | $78.36 |
| 7/1/2013 | 9/30/2013 | $85.74 | $78.35 | $82.88 |
| 10/1/2013 | 12/31/2013 | $88.53 | $81.33 | $88.51 |
| 1/1/2014 | 3/31/2014 | $89.59 | $81.78 | $89.06 |
| 4/1/2014 | 6/30/2014 | $101.51 | $88.24 | $100.1 |
| 7/1/2014 | 9/30/2014 | $100.96 | $90.06 | $90.62 |
| 10/1/2014 | 12/31/2014 | $91.05 | $72.51 | $79.16 |
| 1/1/2015 | 3/18/2015* | $82.42 | $71.70 | $77.57 |
** This
free writing prospectus includes, for the first calendar quarter of 2015, data for the period from January 1, 2015 through March
18, 2015. 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 first calendar quarter of 2015.
| FWP-12 |
EVENTS OF DEFAULT AND ACCELERATION
If the securities have become immediately due and payable following an Event of Default (as defined in the accompanying prospectus) with respect to the securities, the calculation agent will determine the accelerated payment due and payable at maturity in the same general manner as described in “Payment at Maturity” in this free writing prospectus. In that case, the scheduled trading day immediately preceding the date of acceleration will be used as the Final Valuation Date for purposes of determining the Reference Return, and the accelerated maturity date will be three business days after the accelerated Final Valuation Date. If a Market Disruption Event exists with respect to the Reference Asset on that scheduled trading day, then the accelerated Final Valuation Date for the Reference Asset will be postponed for up to five scheduled trading days (in the same manner used for postponing the originally scheduled Final Valuation Date). The accelerated maturity date will also be postponed by an equal number of business days.
If the securities have become immediately due and payable following an Event of Default, you will not be entitled to any additional payments with respect to the securities. For more information, see “Description of Debt Securities — Senior Debt Securities — Events of Default” in the accompanying prospectus.
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. HSBC USA Inc. or one of our affiliates may pay varying underwriting discounts of up to 1.50% per $1,000 Principal Amount of securities in connection with the distribution of the securities to other registered broker-dealers.
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.
We expect that delivery of the securities will be made against payment for the securities on or about the Original Issue Date set forth on the inside cover page of this document, which is more than three business days following the Trade Date. Under Rule 15c6-1 under the Securities Exchange Act of 1934, trades in the secondary market generally are required to settle in three business days, unless the parties to that trade expressly agree otherwise. Accordingly, purchasers who wish to trade the securities more than three business days prior to the Original Issue Date will be required to specify an alternate settlement cycle at the time of any such trade to prevent a failed settlement, and should consult their own advisors.
See “Supplemental Plan of Distribution (Conflicts of Interest)” on page S-59 in the prospectus supplement.
| FWP-13 |
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 XLE (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). Furthermore, unless otherwise established by clear and convincing evidence, the “net underlying long-term capital gain” is treated as zero.
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 linked to the XLE 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, it is possible that all or a portion of any gain on the sale or settlement of the security after one year could be treated as “Excess Gain” from a “constructive ownership transaction,” which gain would be recharacterized as ordinary income, and subject to an interest charge. 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 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.
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.
$
Barrier Accelerated Market
March 19, 2015
FREE WRITING PROSPECTUS
| ||
| 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 | ||
| Events of Default and Acceleration | FWP-15 | ||
| Supplemental Plan of Distribution (Conflicts of Interest) | FWP-15 | ||
| U.S. Federal Income Tax Considerations | FWP-16 | ||
| ETF Underlying Supplement | |||
| Risk Factors | S-1 | ||
| Reference Sponsors and Index Funds | S-7 | ||
| The Energy Select Sector SPDR® Fund | S-8 | ||
| The Financial Select Sector SPDR® Fund | S-10 | ||
| The Health Care Select Sector SPDR® Fund | S-12 | ||
| The iShares® China Large-Cap ETF | S-14 | ||
| The iShares® Latin America 40 ETF | S-17 | ||
| The iShares® MSCI Brazil Capped ETF | S-19 | ||
| The iShares® MSCI EAFE ETF | S-21 | ||
| The iShares® MSCI Emerging Markets ETF | S-23 | ||
| The iShares® MSCI Mexico Capped ETF | S-25 | ||
| The iShares® Transportation Average ETF | S-27 | ||
| The iShares® U.S. Real Estate ETF | S-28 | ||
| The Market Vectors® Gold Miners ETF | S-29 | ||
| The Powershares QQQ TrustsSM, Series 1 | S-31 | ||
| The SPDR® Dow Jones Industrial AverageSM ETF Trust | S-34 | ||
| The SPDR® S&P 500® ETF Trust | S-36 | ||
| The Vanguard® FTSE Emerging Markets ETF | S-39 | ||
| The WisdomTree® Japan Hedged Equity Fund | S-42 | ||
| Additional Terms of the Notes | S-44 | ||
| Prospectus Supplement | |||
| Risk Factors | S-1 | ||
| Pricing Supplement | S-8 | ||
| Description of Notes | S-10 | ||
| Use of Proceeds and Hedging | S-33 | ||
| Certain ERISA Considerations | S-34 | ||
| U.S. Federal Income Tax Considerations | S-37 | ||
| Supplemental Plan of Distribution (Conflicts of Interest) | S-59 | ||
| Prospectus | |||
| About this Prospectus | 1 | ||
| Risk Factors | 2 | ||
| Where You Can Find More Information | 3 | ||
| Special Note Regarding Forward-Looking Statements | 4 | ||
| HSBC USA Inc. | 6 | ||
| Use of Proceeds | 7 | ||
| Description of Debt Securities | 8 | ||
| Description of Preferred Stock | 19 | ||
| Description of Warrants | 25 | ||
| Description of Purchase Contracts | 29 | ||
| Description of Units | 32 | ||
| Book-Entry Procedures | 35 | ||
| Limitations on Issuances in Bearer Form | 40 | ||
| U.S. Federal Income Tax Considerations Relating to Debt Securities | 40 | ||
| Plan of Distribution (Conflicts of Interest) | 49 | ||
| Notice to Canadian Investors | 52 | ||
| Notice to EEA Investors | 53 | ||
| Notice to UK Investors | 54 | ||
| Certain ERISA Matters | 55 | ||
| Legal Opinions | 57 | ||
| Experts | 58 |