Dear Banking Industry,
Scandalous, illegal, or immoral Wall Street activities can happen anytime, anywhere. Take heart! Not one of you is alone. We took a look at some of Wall Street's dirty laundry ourselves. It seems these days it is not shocking. Yet, the brand messaging of some of our "most trusted institutions" seems to be directly at odds with your actual practices--and that should not be.
The Key Business Values at HSBC are available to anyone with an internet connection. They include:
"The highest personal standards of integrity at all levels;
Commitment to truth and fair dealing;
Hands-on management at all levels;
Openly esteemed commitment to quality and competence;
A minimum of bureaucracy;
Fast decisions and implementation;
The appropriate delegation of authority with accountability;
Fair and objective employer;
A merit approach to recruitment/selection/promotion;
A commitment to complying with the spirit and letter of all laws and regulations wherever we conduct our business; and finally--
Promotion of good environmental practice and sustainable development and commitment to the welfare and development of each local community."
We know it's possible to have an off day. And organizations are made up of human beings. Occasionally human beings are greedy. Or immoral. Or unethical. Or just plain wrong. But Michael Picarella aimed, or so it seems, to do something honorable. As a whistleblower regarding his supervisor's behavior, alleged sexual harassment of a young colleague, he seemed to have adherence to the key business values in mind. Would he gain anything by speaking out against his direct supervisor? It does not seem so. Picarella purports his bonus was withheld--he is now fighting for it in an amended complaint.
Sadly, dear HSBC, that alone blemishes the reputation of an institution claiming "the highest personal standards of integrity at all levels." Alas it does not end there. Financial media outlets, including the Wall Street Journal, recently reported the Swiss Bank charges that call into question the reputation of quite a few people including your CEO Stuart Gulliver and Chairman Douglas Flint.
It may be déjà vu for those familiar with the money laundering reported in 2012. According to USA Today, "British banking giant HSBC agreed to pay a record $1.92 billion settlement Tuesday after a broad investigation by U.S. federal and state authorities found the bank violated federal laws by laundering money from Mexican drug trafficking and processing banned transactions on behalf of Iran, Libya, Sudan and Burma. . ." And sadly, yours is not the only banking institution that did not learn from prior mistakes. Unfortunately, other than a few fines (which, given your immense size and holdings are more of a formality, an official slap on the wrist) nothing happened. Nada. There were no major policy changes, no audits, and, other than a fine, practically no consequences.
There have been a myriad of banks that didn't follow the rules and had fines imposed on them. The Wall Street Journal reported 2014 bank fines and fees totaled over $65 billion dollars. And last year Barron's reported that Bank of America's restitution, fines, and legal fees also totaled $65 billion. But fines do not bring about revolutionary change. Nor do they increase consumer protection. "In November, six banks--Citigroup Inc., J.P. Morgan Chase & Co., Bank of America Corp., HSBC Holdings PLC, Royal Bank of Scotland Group PLC and UBS AG--agreed to pay a total of $4.3 billion to U.S., U.K. and Swiss regulators for foreign-exchange price manipulation," reported The Wall Street Journal.
So, how will investors be protected going forward? If history is any indication of the future, banks at times are free to do exactly as they please--as long as they pay to play. Clients deserve far better than illegal, unethical, and egregious behavior from "trusted" banking institutions.
We hope you will mend the error of your ways. Perhaps next year . . .
No discussion or information contained in this article serves as the receipt of, or as a substitute for, personalized investment or legal advice from Abernathy Group II LLC. If you wish to receive a legal opinion or tax advice on the matter(s) in this essay please contact our offices and we will refer you to an appropriate legal practitioner. The Abernathy Group II LLC is neither a law firm nor a certified public accounting firm and no portion of the article content should be construed as legal or accounting advice. Remember to contact Abernathy Group II LLC, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Abernathy Group II LLC's current written disclosure statement discussing our advisory services and fees is available for review upon request.