Former HSBC Executive to be Tried for FX Rate Manipulation

The executive has been accused of front-running a $3.5 billion deal, helping HSBC make additional profit from transactions.

In another case of financial manipulation, a former top executive of HSBC Holdings Plc (HSBA.L) will go on trial in the US over charges relating to case of FX rate manipulation.

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The trial is against a British citizen, Mark Johnson, who was HSBC’s global head of foreign exchange cash trading, but left earlier this year. A spokesman for HSBC made it clear that the case was against the individual and not HSBC.

In 2011, Mark Johnson and another HSBC executive, Stuart Scott, had information that a major client had hired the bank to convert $3.5 billion into pounds as part of a planned sale of the client’s subsidiaries.

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They used this information to front-run the deal, which means that they traded on this advance information. This caused the price of the pound to spike and led to a loss for the client and an additional profit for HSBC.

It is believed that the client was British oil firm Cairn Energy Plc. HSBC earned $3 million from the transactions made by the 2 individuals while it earned an additional $5 million through the transactions made for the client.

Scott lives in the UK and the US is seeking his extradition so that he can stand trial. Johnson has pleaded not guilty to the charges while Scott has denied the accusations.

Recently, 2 employees of Société Générale were indicted for LIBOR manipulation, which just goes to show the different ways that financial manipulation can happen and why it is very important for watchdogs to keep a close eye on firms.

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