HSBC Global Banking and Markets, Canada is a business line that operates through HSBC Bank Canada and its wholly owned subsidiary, HSBC Securities (Canada) Inc. Representatives of HSBC Securities (Canada) Inc. (“HSBC”, “our”, “we”) provide a broad range of services to institutional and corporate clients, including fixed income sales and trading. In the course of providing services and products to you, there will be situations where a conflict will arise between our interests and yours. These conflicts may be actual conflicts of interest or you may perceive that we have a conflict of interest. Conflicts can give rise to a concern that we or our representatives may act or will act with a view to their own business or personal interest which may result in our or our representative’s financial gain. Conflicts can also arise in circumstances where there are differing interests amongst clients, which may lead to a perception that we will be favouring a client or set of clients over other clients.
We seek to avoid or minimize conflicts where reasonably possible. We seek to avoid actual or perceived favouritism or discrimination amongst clients and to ensure that no client receives preferential treatment over another in providing financial products and services to you. Some conflicts cannot be avoided, including those conflicts that are inherent in the business model that we use and our relationship with our affiliates, however, at all times, we address these conflicts by implementing controls that we believe to be effective.
Canadian securities laws require us to take reasonable steps to identify and respond to material conflicts of interest in your best interest and tell you about them. This Conflicts Disclosure Statement identifies which conflicts of interest we consider are material when we and our representatives provide financial products and services to you. We also describe the potential impact on and risk that the conflict could pose to you and how we address the conflict to minimize its impact and risks to you and our other clients.
In situations that we do not or cannot avoid a conflict of interest, where our interests may compete with yours, we will always strive to give your interests priority to ours, which allows you to be confident that we address conflicts in your best interest. In addition, there may be other situations that pose unique conflict of interest issues which we will provide you with supplemental disclosure. Unless otherwise specified, we deal with and manage conflicts as follows:
Below is important information that will help you be fully informed about conflicts of interest we consider are material to you.
We are a member of a group of related companies known as the HSBC Group whose ultimate parent entity is HSBC Holding plc, headquartered in London, UK. In the course of providing services and products to you, we may from time to time enter into transactions or arrangements with other members of the HSBC Group or accept services from members of the HSBC Group or other persons or companies which are related or connected to us. All members of HSBC Group are separate entities from each other with information barriers and robust compliance systems.
Certain of our directors and officers are also directors or officers of other HSBC Group members. In addition, we have various governance committees in which some committees are shared across HSBC Group members and as such, are comprised of members from those HSBC Group members. Our directors and officers receive specific training on their corporate and regulatory responsibilities including conflict of interest issues arising from holding positions at several HSBC Group members.
Our membership in the HSBC Group, together with the transactions and arrangements we make with other members of the HSBC Group, will give rise to conflicts of interest, and we have adopted policies and procedures to identify and respond to these conflicts. We will only enter into these transactions or arrangements where they are permitted under applicable securities laws and where we believe they are in your best interests in the applicable circumstances.
In all cases, we recognize that the conflicts described in this section raise perceptions that we will favour the business interests of the various members of HSBC Group, so that you may have concerns about those products and services we provide you that are sourced from or provided by those members. Described below, we have set out these conflicts and other conflicts of interests and how we manage them to ensure that we act in your best interests.
We act as a dealer and market maker in the fixed income market. HSBC deals with clients as principal in fixed income transactions, unless otherwise agreed. This is true whether HSBC is responding to a request for quote, providing indicative pricing, executing client orders, or otherwise transacting in the market. The role of market-making firms such as HSBC in the fixed income markets may give rise to conflicts of interest between such firms and other market counterparties, including their clients, which cannot be completely eliminated.
As a result of our activity in the fixed income markets, at any time we are likely to be engaged in transactions with multiple clients, each of whose interests may diverge from those of HSBC or other clients. As part of our trading activity, HSBC trading personnel may anticipate near-term demand; take positions in connection with our risk management activities; and minimise the impact of order execution on the market. HSBC's activities are intended to provide it with sufficient inventory to service its clients.
As part of our activities as a fixed income dealer and market maker, we may hold positions or trade in a way that may not be aligned with the interests of an individual client, in aggregate or in relation to particular trades. HSBC may, for example:
When conducting these activities, we seek to minimise market impact to the extent consistent with our trading and risk management needs and objectives.
We regularly act as a selling agent, underwriter or in another capacity in the distribution of securities where we receive compensation from issuers and other third parties. We or our affiliates, may have an ownership, lending, investment banking or other relationship with the issuer of such securities or a selling securityholder that may cause the issuer or selling securityholder to be a “related issuer” or "connected issuer" to us or such affiliate under Canadian securities laws. In accordance with securities laws, issuers may be required to provide specific disclosure in the offering document (e.g. prospectus) of such relationships and the compensation we will receive.
We provide capital financing, advisory and transaction banking services. In some cases, we or other members of HSBC Group, may act for one or more clients or act in multiple roles in respect of a specific, competing or related transaction and associated financial markets activities, including the issuance of new securities. When participating in such transactions, we or other members of the HSBC Group may be provided with confidential information with respect to one or more clients. Our representatives may also be in possession of knowledge based on their own or another part of HSBC's prior interaction with a client, or in relation to a particular asset, that could be inappropriately used to influence the promotion of a particular product or activity. As a result, we or other members of the HSBC Group or any of our other divisions or teams may have interests or duties which conflict with your interests and which would or might otherwise conflict with the duties owed by us to you.
We have policies and procedures reasonably designed to manage and mitigate the risk of such conflicts of interest. HSBC has rules and procedures which control disclosure of information between the HSBC Group’s various members, between different divisions within these legal entities and also between the transaction teams within those entities. HSBC also maintains internal conflict registers, documenting and evaluating all identified potential transactional, structural and personal conflicts. These registers also record the controls in place to prevent or manage each type of conflict, and are subject to regular oversight and review by HSBC senior management. Where necessary, we further manage conflicts by physically separating different business functions and maintain information barriers between certain employees to restrict internal exchange of information. In some cases, HSBC’s procedures and controls may not of themselves be sufficient to ensure that a potential conflict of interest does not damage a client’s interests. In these circumstances, HSBC may consider it appropriate to disclose the potential conflict to the client and may seek the client’s consent to proceed. However, HSBC may decline to act or cease to act in any circumstance where there is residual risk of damage to the interests of any client.
Certain decisions that affect our business and the products and services we provide you may be made at a HSBC Group level and those decisions may be made to favour the commercial interests of the HSBC Group as a whole. We are required to comply with Canadian securities laws and no HSBC Group decision will impact our compliance in this regard. We will address this conflict by continuing to follow our policies and procedures that are designed to put clients’ interests first and comply with Canadian securities laws.
Our representatives receive remuneration which may be comprised of a base salary and a variable pay based on a number of performance criteria. Performance criteria remuneration do not include compensation for the representative’s role in introducing our clients to other investment products or services offered by our affiliates in Canada as are considered appropriate. In addition, we or our affiliates do not award incentives (such as merchandise or corporate events) to our representatives for their role in the sale of investment products or services offered by us. Our representatives may have a personal or business relationship with clients, but are not permitted to favour those clients over clients with whom they do not have those relationships.
We have a Personal Trading Account Dealing Policy and a Statement of Business Principles & Code of Ethics, which is designed to ensure that our representatives act in accordance with applicable securities laws and other laws, that they act in the best interests of us and our clients, that they avoid actual or potential conflicts of interest, and that they do not engage in personal securities transactions that are prohibited by law, such as insider trading, or that negatively impact our clients.
Our representatives, officers and directors put the interests of our clients first, ahead of their own personal self-interests. We have policies prohibiting our representatives from engaging in certain personal trading activities including speculative trading activity, prohibition in participating in an investment club or any trading that may give the impression of wrongdoing by the representatives or us. In addition, any individual who has, or is able to obtain access to, non-public information concerning the portfolio holdings, the trading activities or the ongoing investment programs of our clients, is prohibited from using such information for their direct or indirect personal benefit or in a manner which would not be in the best interests of our clients. These individuals also must not use their position to obtain special treatment or investment opportunities not generally available to our clients or the public. These individuals are only allowed to make certain personal trades if it falls within our Personal Account Dealing Policy and they have received approval from their line managers and HSBC’s Global Personal Account Dealing team to ensure such trade will not conflict with the best interest of our clients.
At times, our executive and representatives may participate in outside business activities such as serving on a board of directors, participating in community events or pursuing personal outside business interests. We have policies in place that require individuals to disclose situations where a conflict of interest may arise prior to engaging in any outside business activity in order to determine how such conflicts may be addressed. Employees may only engage in such outside business activities if approved by an applicable supervisor pursuant to our policies.
Our executive and representatives are not permitted to accept gifts or entertainment beyond what we consider consistent with reasonable business practice and applicable laws. We set maximum thresholds for such permitted gifts and entertainment so that there cannot be a perception that the gifts or entertainment will influence decision-making.