|May 26, 1998|
The SESC sent recommendation to the Minister of Finance to take disciplinary action against
HSBC pursuant to Article 19 1) of Ministry of Finance Establishment Law on May 26, 1998.
I. Bucketing and Counter Bucketing
1) On August 5, 1997, HSBC received buy order of 77 issues (a customer had requested the director of Japanese Equities Trading Department who was in charge of placing orders to place market orders at closing and get them executed at closing price, and if it seemed difficult, try to get it executed at the price as close to the final execution price as possible) and placed them but 9 issues out of them was not executed. However, to meet the customer's request, the director of equities department of HSBC informed the customer that all the orders had been traded at the final execution price of that day, and on the next day he bought the shares on the company's account for the delivery to the customer.
(Violation of SEL Article 47 applied in Law on Foreign Securities Firms (LFSF) Article 171) and SEL Article 129 1))
OnAugust7, 1997 HSBC received buy orders of over the counter
stock from a customer. The director who had placed the order
informed the customer by mistake that 7,000 shares was traded
although in fact only 6,000 had been executed. On the following
day, he found that mistake. However, instead of receiving another
order from the customer and placing it, he bought 1,000 shares
on the company's account for the delivery to the cumtomer on
August 11, 1997. (Violation of SEL Article 47 applied in LFSF
2) As for 12 discretionary orders received from corporate customers from January 1997 to February 1998, in order to make the average of execution price of them close to the average of all transactions on the stock exchange on that day or by other reasons, the director informed on his own decision the customer of the price which was different from the real execution price and delivered them.
3) On September 24, 1997, though there was no untrue statement in an original report which an employee submitted to the customer , after submitting the report, he found that he informed the customer of wrong contents of transaction by phone. He did not want the customer to know his mistake. In this reason, after getting understanding of head of equities sales, he exchanged the original report with false one.
4) As for 40 orders received from customers from January 1997 to February 1998, employees informed the customers of wrong contents of transaction and put the wrong data into the in-house computer system. Though they had found the mistakes the following day, they did not dare to correct the errors on the director 's decision and delivered them to customers with the price different from the execution price.
As mentioned above, as for 1), 2), 3) HSBC with involvement of the director of Japanese Equities Trading Department or other employees put the price which was different from the real execution price into the in-house cumputer deliberately. As a result of this, the company submitted reports containing false statements based on these wrong data.
As for 4), even after noticing these mistakes, HSBC did not dare to resubmit true reports to customers for correcting the errors.
(Violation of LFSF Article 37 3) and SEL Article 48 applied in LFSF Article 171))