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Compensation and Conflicts

About Compensation and Conflicts

Compensation of Individuals

Our representatives1 aim to serve the interests of our clients and build long lasting, mutually valuable client relationships. To be more consistent with that aim, our representatives do not receive commissions on the products they sell. Rather, they are paid a salary with the opportunity to receive a fully discretionary bonus.

Our representatives’ personal performance against established key performance indicators and balanced scorecard objectives is considered in determining whether and how much to award each individual on a discretionary basis. Individual variable pay decisions will consider non-financial factors, such as the effective management of risk, compliance, quality and values, their activities in meeting with clients and fulfilling clients' financial needs, as well as financial factors, including the accumulation of assets (including assets gathered and retained in managed accounts and investments in annuities recommended by the representative), the generation of income to HSBC Securities resulting from client investments (including quarterly fees from managed accounts), and the funding of HSBC’s discretionary compensation plan.  Accordingly, certain of these factors create a conflict as your representative has an interest in recommending products and services offered by HSI and its affiliates, including brokerage accounts, managed accounts, and transactions effected for brokerage accounts.

In addition, our representatives may participate in HSBC recognition programs involving travel and entertainment, and they are also permitted by law and by HSI policy to receive certain forms of compensation from third parties (including mutual fund and annuity product providers) such as meals, occasional ticket to events, and gifts of a nominal value as permitted by industry regulations. Also, a mutual fund or annuity provider may sponsor events for educational purposes to which individual representatives may be invited. Such benefits also include transportation related to the above, and access to certain industry related conferences.  Participation in recognition programs is based upon personal performance, which is also impacted by the factors noted above, including the accumulation of assets and income to HSBC Securities, and therefore your representative has further incentives to recommend that a client invest assets with HSBC Securities. Feel free to ask your representative about our compensation for any particular service or product that you purchase.

HSBC Securities (USA) Inc. and HSBC Insurance Agency (USA) Inc. reserve the right, at their discretion and without prior notice to change the methods by which they compensate their sales professionals.

 

Compensation to HSBC Securities (USA) Inc. and HSBC Insurance Agency (USA) Inc.

As broker

When acting as a broker, HSBC Securities (USA) Inc. earns revenue based on the proprietary and third party products and services provided to our clients. This includes commissions generated in connection with client transactions in funds, equities and fixed income products and revenue from other products we may recommend to you. For example, HSBC Securities (USA) Inc. earns revenue based on sales loads, commissions, or concession in connection with the offering of various packaged products, such as mutual funds, exchange traded funds (ETFs) or 529 College Savings Plans.

Further, HSBC Securities brokerage accounts are subject to fees and commissions as detailed in our published Fee and Commission Schedule. The Fee and Commission Schedule differs, depending upon whether the account is assigned an individual advisor, or is serviced exclusively through our Wealth Services Desk without an assigned advisor as a self-directed brokerage account with no available investment advice.

Clients should be aware that HSBC Securities’ practice, as a Broker/Dealer, of accepting such fees creates a conflict of interest. Representatives do not receive commissions on the products they sell. Rather, they are paid a salary with the opportunity to receive a fully discretionary bonus. Please see ‘Compensation of Individuals’ or ADV Part 2 for additional information. 

 

As investment adviser

For investment advisory managed products, including Spectrum and MPA ("Managed Products"), HSBC Securities (USA) Inc. is the sponsor of the HSBC Securities (USA) Inc. Managed Products. HSBC Securities (USA) Inc. is a federally registered investment adviser (with the Securities and Exchange Commission) that serves as the Investment Adviser and receives management fees. HSBC Global Asset Management (USA) Inc. ("AMUS"), which is also a registered investment adviser, in connection with the Managed Products, provides administrative and other services to HSBC Securities (USA) Inc., and AMUS receives a portion of the management fee for the Managed Product from HSBC Securities for its services. AMUS also serves as the adviser and administrator of HSBC Funds, which may be among the underlying investments in the Managed Products; specifically the HSBC Money Market Mutual Funds are used as some of the underlying liquidity fund investments. Foreside Distribution Services, L.P., member FINRA, is the distributor of the HSBC Funds and is not affiliated with the representative. HSBC Securities (USA) Inc., member NYSE, FINRA and SIPC is a sub-distributor of the HSBC Funds.

Mutual funds (including ETFs) outside of the HSBC Fund family are also offered as options in the Managed Products and are advised by investment managers unaffiliated with HSBC Securities (USA) Inc., who also receive a fee for their investment services.

HSBC Securities clients may elect to have their idle cash balances swept into money market funds including funds that are managed by AMUS and affiliates, and for which they receive advisory fees. HSI clients may pay these fees, as well as their Program fee as permissible by law. Similar to the process described above, program fees for retirement accounts are reduced by the amount of advisory fees for the money market funds advised by AMUS.

Representatives of HSBC Securities are also securities-licensed Registered Representatives of HSBC Securities, and in their capacity as Registered Representatives engage in the sale of securities-related products and services outside of the MPA Program. You are under no obligation to purchase or sell securities products and services through HSBC Securities or to participate in the MPA Program; however if you choose to do so, you should be aware that the Registered Representative may receive additional compensation as described in the ‘Compensation of Individuals’ section, that creates a conflict of interest. 

The program fees that you pay to HSBC Securities when you enroll in an investment advisory program creates a material conflict of interest for HSBC Securities and your representative to provide you with a recommendation to enroll in a HSBC Securities advisory program because your enrollment and aggregate investment through a HSBC Securities advisory program will result in compensation to us. Moreover, because HSBC Securities program offerings and fees vary among advisory programs, and such fees may be greater than what HSBC Securities would receive if the client paid separately for investment advice, brokerage, and other services, a conflict of interest exists for HSBC Securities to provide you with a recommendation to enroll in a HSBC Securities advisory program for which we receive greater compensation. Because the amount of your investment, income to HSBC, and the fact that you made an investment are among factors considered when determining your representative’s discretionary bonus award, your representative also has a conflict of interest to recommend that you enroll in an HSBC Securities advisory program.

If you would like a current copy of the ADV Part 2 for any of the parties involved in the management of the managed products, including applicable advisors, please contact an HSBC Securities (USA) Inc. representative. These documents contain complete information relating to the services and fees of the managed products.

 

As insurance agencies

As insurance agencies, HSBC Securities (USA) Inc. and HSBC Insurance Agency (USA) Inc. earn commissions for the sale of insurance and annuity products. The amount of commission is based on the premium that you pay for your insurance policy or annuity contract. You are under no obligation to purchase or sell securities and insurance products through HSBC Securities (USA) Inc. and HSBC Insurance Agency (USA) Inc.; however if you choose to do so, the representative may receive additional compensation as described in ‘Compensation of Individuals’.

 

Compensation may differ

Please note that certain types of products (including different share classes of mutual funds) pay greater compensation than others to HSBC Securities (USA) Inc. or HSBC Insurance Agency (USA) Inc. Feel free to ask your representative about our compensation for any particular service or product that you purchase.

 

Other payments from third parties

It is permissible for HSBC Securities (USA) Inc. and HSBC Insurance Agency (USA) Inc. to receive compensation from other sources, including reimbursements from third parties (including mutual fund and annuity product providers) for the cost of education programs and seminars for employees and clients or internal HSBC employee recognition programs or events. Third party support for education programs, marketing/advertising initiatives and seminars is approved and accepted on occasion, however it is HSBC's current practice not to accept third party financial support for internal HSBC employee recognition programs. The amount of these payments are not directly related to the level of assets you, or any other of our clients, invest in or with the product sponsor. Based on historic trends, HSBC Securities does not expect to receive gifts (and other non-cash compensation) in excess of the de minimis thresholds under the DOL regulations with respect to a Retirement Account.

The receipts of these payments are not connected, in whole or in part, with or to any specific or particular client transaction.

 

A Note about HSBC Proprietary Products

As stated above AMUS is an affiliate of HSBC Securities' (USA) Inc. (and HSBC Insurance Agency (USA) Inc.) and it earns additional revenue, including management fees, if you choose to buy a HSBC Fund. When offering mutual funds, our representative may recommend an HSBC Fund in a brokerage account other than a Retirement Account. Please refer to the fund prospectus and statement of additional information for more information about fees payable to HSBC affiliates.

Additionally, HSBC Securities (USA) Inc. may sell and be compensated for other proprietary products, including, for example, the sale of structured products issued by HSBC Bank USA, N.A. or HSBC USA Inc. affiliates. Our affiliates also earn revenue as described in the applicable offering documents.

Please note: for IRA accounts or other qualified ERISA accounts ("Retirement Accounts") other than within a managed account that is subject to an investment advisory agreement, our representatives will make no mutual fund and no structured product recommendations whatsoever - whether proprietary or third party.

Further, as noted above, HSBC Securities (USA) Inc. is sponsor for managed products and it engages AMUS to perform certain services in connection with those managed products.

 

Specifically Regarding Retirement Accounts

HSBC Securities has simplified its offering for Retirement Accounts to focus on:

  • Recommendations of advisor-supported managed accounts;
  • Recommendations of immediate fixed rate annuities; and
  • Availability of non-advised execution-only brokerage accounts, which are sometimes referred to as "self-directed" or "client-directed" accounts

HSBC representatives will no longer provide investment recommendations on retirement assets in brokerage accounts, or with respect to adding premiums to, or making exchanges of, retirement variable annuities and retirement fixed deferred annuities.

If you have or are considering a retirement account with HSBC Securities for which you seek advice, please consider HSBC Securities (USA) Inc. Disclosure Regarding Our Services for Retirement Accounts available through the link to the right of this page.

 

 Investments, Annuity and Insurance Products:

ARE NOT A BANK DEPOSIT OR OBLIGATION OF THE BANK OR ANY OF ITS AFFILIATES ARE NOT FDIC INSURED ARE NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY ARE NOT GUARANTEED BY THE BANK OR ANY OF ITS AFFILIATES MAY LOSE VALUE

 

1 “Representatives” refers to Premier Wealth Advisors (PWA), and Premier Relationship Advisors (PRA). PWAs primarily focus on a full suite of Premier products and services while PRAs primarily focus on a full suite of Advance products and services. Both offer bank products through HSBC Bank (USA) N.A., investments and certain insurance products, including annuities, through HSBC Securities (USA) Inc. and traditional insurance products through HSBC Insurance Agency (USA) Inc.

Investment and certain insurance products, including annuities, are offered by HSBC Securities (USA) Inc. (HSI), member NYSE/FINRA/SIPC. In California, HSI conducts insurance business as HSBC Securities Insurance Services. License #: OE67746. HSI is an affiliate of HSBC Bank USA, N.A. Whole life, universal life, term life, and other types of insurance are provided by unaffiliated third parties and are offered through Insurance Agents of HSBC Insurance Agency (USA) Inc., a wholly owned subsidiary of HSBC Bank USA, N.A. Products and services may vary by state and are not available in all states. California license #: OD36843.

All decisions regarding the tax implications of your investment(s) should be made in connection with your independent tax advisor.

Research backgrounds of brokers and brokerage firms for free by visiting FINRA's BrokerCheck website

United States persons (including U.S. citizens and residents) are subject to U.S. taxation on their worldwide income and may be subject to tax and other filing obligations with respect to their U.S. and non–U.S. accounts – including, for example, Form TD F 90–22.1 (Report of Foreign Bank and Financial Accounts ("FBAR")). U.S. persons should consult a tax adviser for more information.

For more details regarding conflicts when we provide advice to Retirement Accounts

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