HSBC Securities (USA)

Kurta Law is investigating investment recommendations made by HSBC Securities (USA) (CRD#: 19585) brokers. The firm is a broker-dealer and investment advisory firm with headquarters in New York, New York. HSBC Securities (USA) is affiliated with HSBC Insurance Agency (USA) and HSBC Bank USA, NA.

HSBC Securities (USA) has also operated under the following names:

• Carroll McEntee & McGinley Incorporated
• InvestDirect
• HSBC Securities, Inc.

Fees and Conflicts of Interest

Brokerage firms are required to provide investors with a Customer Relationship Summary (Form CRS) that discloses its conflicts of interest and the fees associated with their services. HSBC Securities (USA) discloses the following on its Form CRS:

• HSBC Securities (USA) charges fees on each transaction, which may be charged as commissions, sales charges, or other fees depending on the particular investment. Some investments also include trails, which are fees charged for as long as you hold the investment.
• When HSBC Securities (USA) trades with you in a principal capacity, it adds a markup or markdown to the price. The firm receives more revenue for these transactions, so it has an incentive to encourage them.
• Some investments, such as annuities, mutual funds, privately-offered funds, or exchange-traded funds (ETFs), have additional fees.
• HSBC Securities (USA) earns greater compensation and other benefits when you invest in products advised, managed, or sponsored by the firm or one of its affiliates.
• The firm also receives compensation from third parties, including 12b-1 fees and shareholder servicing fees, when it recommends certain investments.

Broker-Dealer Services

HSBC Securities (USA) offers the following investment products as well as stocks and bonds. However, investors should keep in mind that these products can be high-risk and may charge high fees.

• Mutual funds
• Exchange-traded funds (ETFs)
• Annuities and variable insurance products
• Money market funds
• Structured notes

Regulatory Actions

HSBC Securities (USA) has been the subject of multi-million dollar fines by FINRA and the SEC, as disclosed in the regulatory history on its detailed BrokerCheck page.

TRACE Reporting Allegations

On October 29, 2024, HSBC Securities (USA) consented to the entry of findings that it allegedly failed to timely report approximately 5,635 corporate debt securities transactions to FINRA’s Trade Reporting and Compliance Engine (TRACE).

According to a Letter of Acceptance, Waiver & Consent (AWC), the firm allegedly failed to report these transactions within 15 minutes of their execution. The firm’s supervisory system allegedly also lacked reasonable guidance as to addressing late reporting by traders.

HSBC Securities (USA) consented to a censure by FINRA, a $125,000 fine, and an undertaking to revise its supervisory system. You can read the AWC here.

$2 Million FINRA Fine

In an AWC filed on October 9, 2023, HSBC Securities (USA) consented to the entry of findings that it allegedly published 67,482 equity research reports with approximately 275,000 disclosure inaccuracies with regard to the firms’ conflicts of interest from 2013-2021.

The AWC further alleged that HSBC Securities (USA) published 2,470 debt research reports with approximately 39,000 disclosure inaccuracies between 2016 and 2021. The firm allegedly did not establish supervisory procedures or other systems to confirm the accuracy of information in its automated data feeds.

The firm consented to a censure, $2 million fine, and an undertaking to resolve the issues alleged in the AWC. You can access the AWC here.

$15 Million SEC Fine

On May 11, 2023, the Securities and Exchange Commission filed a regulatory action against HSBC Securities (USA), alleging that firm employees, including supervisors, used personal devices for off-channel communications related to their business from at least January 2018 to September 2021.

The firm allegedly also failed to preserve the majority of these communications, in violation of its own policies.

The SEC censured the firm and ordered it to cease and desist from future violations of Section 17(a) of the Securities Exchange Act of 1934 and Rule 17a-4 thereunder. The firm was also fined $15 million and ordered to comply with unspecified undertakings.

Alleged Screening Failures

On February 2, 2021, FINRA alleged that HSBC Securities (USA) allegedly failed to reasonably screen 2,191 non-registered associated persons for statutory disqualification under the Securities Exchange Act of 1934 between 2011 and 2019.

The firm’s supervisory procedures allegedly only required registered individuals and those required to be registered to be fingerprinted and screened for statutory disqualification.

The firm consented to a censure and fine of $650,000, and to undertake a review of its systems and procedures related to screening of non-registered associated persons. You can read the AWC here.

Alleged Misrepresentation

On March 16, 2020, the SEC instituted a regulatory action alleging that HSBC Securities (USA) made false and misleading statements to current and prospective advisory clients with regard to how its dual-registered investment adviser representatives (IARs) were compensated between 2015 and 2017.

The firm’s Form ADV Part 2A and wrap fee program brochures allegedly stated that IARs were compensated based on non-financial factors and not the fees for its advisory programs. Instead, IARs’ compensation was allegedly determined in part by advisory fees and other financial factors.

The SEC further alleged that the firm failed to adopt written policies and procedures reasonably designed to prevent violations of the Investment Advisers Act of 1940 in connection with its misrepresentation of representative compensation.

HSBC Securities (USA) was censured and fined $725,000. The SEC also ordered the firm to cease and desist from future violations of Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7 thereunder.

Brokers with Misconduct Allegations on Their Records

Kurta Law is aware of the following brokers currently or formerly associated with HSBC Securities (USA) who have allegations of misconduct of their records. Contact a securities attorney if you have concerns about your broker’s conduct.

• Li Kelly: https://www.kurtalawfirm.com/blog/li-kelly/ 
• Rafael Cortez: https://www.kurtalawfirm.com/blog/rafael-cortez/ 

Kurta Law Can Help

Investors who lost money working with a HSBC Securities (USA) broker or advisor should reach out to an investment fraud lawyer for help. Our attorneys offer free case evaluations and do not charge a fee unless we win your case. Call (877) 600-0098 or email info@kurtalawfirm.com.