Fresh woes seem to be in store for HSBC as a new legal problem has emerged now for the financial entity. It is facing allegations that its traders engaged in unfair practices by engaging in forex market manipulations to enjoy profits at the cost of their client accounts. The trades that are being questioned date back to quite a while ago, with some from about a decade ago.
Application to view old records
An application to peruse old records of HSBC's trading activities has been made in London's commercial court. The applicant is the UK-based currency investment business ECU Group. In particular, three big transactions processed and executed by HSBC way back in 2006 have been asked for; all of them being forex orders.
News about regulators finding evidence of rigging in the forex market by many financial entities including HSBC has already been publicized earlier. These entities were also penalized with a fine of $4.3bn a few years ago.
Bank fails to follow up on internal inquiry assurance
ECU is not raising the issue for the first time. When the trades were executed in 2006, ECU has a suspicion of malpractice by HSBC and made it clear to the latter that it suspected that something was amiss. HSBC officials had assured ECU of a full- fledged inquiry into the affair but later came back with the report and conclusion that no wrong- doing had been uncovered. ECU maintains its original stance that the traders engaged in 'front running' its orders. The circumstances that followed each big trade made it evident that foul play was involved as the market would move unfavorably for ECU as soon as its orders were placed. However, despite bringing this to the notice of HSBC officials, ECU was asked to avoid taking the issue any further.
Recent arrests prompt EU to revive the complaint
The reason for ECU re- entering the fray is that two HSBC forex traders have now been charged with front running another client's trade. This trade was executed last year. One of the forex traders in question has been arrested now. This could have prompted ECU to revive its own front running accusation in the hopes of getting resolution. It is interesting to note that HSBC had claimed to be investigating the case of the other client, and had, in fact, hired a well-known law firm to look over its trades from the period in question. Despite this apparent investigation by the firm, the Department of Justice went ahead with its arrest order of the forex trader.