NOTICE OF SUMMARY ACTION

FILE NO.:   

RSRH-18-4989

MEMBER FIRM: 

HSBC BANK USA, N.A.

RULE VIOLATIONS:

703.A.7 Conditions For Approval and 512. Reporting Infractions

703.A. Conditions for Approval

(7) The facility shall be required to report inventory to the Exchange as prescribed herein. The inventory shall include eligible and registered metal. Eligible metal shall mean all such metal that is acceptable for delivery against the applicable metal futures contract for which a warrant has not been issued. Registered metal shall mean an eligible metal for which a warrant has been issued. All information pursuant to this section shall be transmitted to the Registrar no later than 2:00 p.m., for gold stock for delivery against the Gold Kilo futures contract, 6:00 p.m. local Hong Kong time, on the business day following the day on which the facility comes into possession of relevant information. In addition to containing all relevant information for the preceding business day, notifications pursuant to this section sent by 2:00 p.m., for gold stock for delivery against the Gold Kilo futures contract, 6:00 p.m. local Hong Kong time, on a Tuesday shall include all relevant information for the last business day as well as the Saturday and Sunday immediately preceding the Tuesday on which the notification is made.

In addition, on a daily basis, the facility shall provide, in an Exchange-approved format, the following information regarding its stocks:

a. The total quantity of registered metal stored at the facility.

b. The total quantity of eligible metal stored at the facility.

c. The quantity of eligible metal and registered metal received and shipped from the facility.

512.A. General

All data, records and other information required by the rules to be reported to the Exchange or the Clearing House, as applicable, must be submitted in an accurate, complete and timely manner.

FINDINGS:

On February 16, 2018 HSBC Bank USA, N.A. reported a withdrawal of silver 7,603,547.550 troy ounces from their eligible silver stock. The Registrar’s Office reached out to HSBC Bank USA, N.A. regarding their withdrawal and were informed that due to system limitations they are not able to partial withdraws as they occur and only report lump sum withdraws.  As a follow up to this event HSBC Bank USA, N.A. LLC has implemented new system procedures to prevent such an incident occurring again in the future.

PENALTY:           

On May 30, 2018, HSBC Bank USA, N.A., pursuant to Rule 512 (“Reporting Infractions”), was issued a $7,500 fine by the 512 Committee for its violations of Rule 703.A.7.

EFFECTIVE DATE:  

November 21, 2018