Legal Information

Conduct is a critical component of all of HSBC’s business activities. It is embedded within the Group’s strategy, business models and planning, our culture and behaviours, interaction with customers, products and services, financial markets operations, and governance and oversight processes.

We have established a Global Conduct Framework with five outcomes describing the behaviours to which we aspire. It increases our understanding of how the decisions we make affect customers and other stakeholders, helping us to strengthen our business. Our conduct framework governs everything we do and aligns to the JFSA’s Client Centric Fiduciary Principles for which our businesses in Japan fully support.

Each global business and global function must ensure that its policies are designed to deliver the outcomes set out in the Global Conduct Framework.

We will assess our success against five outcomes as follows:

1. We understand our customers’ needs
…and design, market and sell products and services that recognise the long-term interests of customers.

2. We provide products and services that offer a fair exchange of value
…which balance customer and HSBC interests and do not undermine market competition.

3. We service customers’ ongoing needs, and put it right if we make a mistake
…ensuring products and standards of service continue to have a positive impact.

4. We act with integrity in the financial markets we operate in
…acting in our customers’ interests and not in ways which manipulate or undermine markets.

5. We operate resiliently and securely to avoid harm to customers and markets
…across digital, physical and operational arrangements to support customer needs and wider financial system stability.

We are enhancing our governance framework for business which our company sells structured bonds, etc. to other securities companies ("distributors”) and our distributors conduct solicitation/sales activities regarding the structured bonds, etc. to end clients including individual investors by establishing a guideline. Key elements in the guideline and its status are as follows.

Key Elements in the Guideline

• We conduct periodic and ad-hoc reviews on status of solicitations/sales by our distributors from various points of view.
• We conduct pre-evaluation of structure and risk, set sales standard based on the evaluation, and obtain internal approval for sales of structured bonds, etc. to our distributors.

Implementation Status of the Guideline
We have already been implementing the above measures.

We do not carry any products that are an object for Common KPI.

Please refer to the Japanese version.

April 2022
HSBC Securities (Japan) Co., Ltd.
This Best Execution Policy establishes the policy and method in order to execute orders on the best possible terms for the client as stipulated in Article 40-2, Paragraph 1 of the Financial Instruments and Exchange Law.
When HSBC Securities (Japan) Co., Ltd. ("HSBC Japan") receives an order from a client involving securities listed on financial markets in Japan, we will do our best to execute the order in accordance with the following policy, unless the client provides other instructions concerning how the transaction should be executed.

1. Applicable securities
   (1)"Listed stocks, etc." as defined in Article 16-6 of the Enforcement Ordinance of the Financial Instruments and Exchange Law, which includes stocks, convertible bonds, exchange-traded funds (beneficiary certificates of investment trusts linked to equity indexes), real estate investment trusts (REITs), etc.
   (2) Although "securities handled" as defined in Article 67-18, Item 4 of the Financial Instruments and Exchange Law, which includes Phoenix stocks, convertible bonds, etc., are legally covered by the best execution policy, we do not perform transactions for these securities.
2. Method for executing orders on the best terms
   We will handle all orders received from clients as brokerage orders and will not serve as the direct counterparty for these transactions. All orders from clients concerning listed stocks, etc. will be executed on financial markets in Japan. We will not use off-exchange transactions, including proprietary trading systems (PTS).
   (1) When an order is received from a client, we will immediately execute the transaction on a financial market in Japan where the applicable security is listed. When an order is received after trading hours for financial markets, the order will be executed after the financial market reopens. (2) Orders from clients will be executed on financial markets as follows.
   (a) For securities listed on a single financial market, the order will be executed on that market.
   (b) For securities listed on multiple financial markets, the order will be executed on the market that we select as having the highest liquidity based on trading volume and other items during a specific period. Specific reasons for selection of a particular market, in addition to the items that we already disclose, will be provided to clients upon request.
   (c) If we are not a participant or member of the market used in (a) or selected as described in (b), we will execute the transaction on that market using a party that is a participant or member of that market and with which we have a brokerage contract for orders on that market.
3. Reason for selection of a particular method
   We use financial market rather than off-exchange transactions because we believe that financial market transactions are better from the clients' standpoint. Financial markets attract a large volume of orders from investors, resulting in greater liquidity, a better possibility of completing a transaction, faster transactions, and other advantages. For securities listed on multiple financial markets, we use the market with the highest liquidity because we believe that this is in the best interests of the client.
4. Other items
   (1) Irrespective of the order execution method used as prescribed in the above item 2, the transactions listed below will be executed as follows.
   (a) For transactions where the client specifies a particular execution method (request for HSBC Securities to act as the direct counterparty, request for execution on a particular financial market, request for execution during a particular time of day, etc.), we will use the specified method.
   (b) For transactions involving odd lots or amounts of less than one trading unit (tangen), we will use financial product companies that handle these transactions
   (2) There may be instances where we are forced to select an order execution method that is not consistent with this best execution policy due to a computer system malfunction or other problem. In this case, we will do our best to execute the order on the best terms possible at that time.

Our obligation involving the best execution of orders is not restricted to the price. We are obligated to execute orders in the best manner by also taking into account cost, speed, reliability and many other factors associated with the order. Consequently, there may be instances where, following the execution of an order, the terms do not appear to be the best possible based on price alone. However, it is not possible to use solely the price as the basis for determining whether or not a particular transaction is in violation of the best-execution obligation.

HSBC Holdings plc, its subsidiaries and associates (HSBC Group) is a global organisation which provides an extensive range of financial services to its customers around the world. In Japan, HSBC Group entities include branches of The Hongkong and Shanghai Banking Corporation as well as HSBC Securities (Japan) Co., Ltd. and HSBC Asset Management (Japan) Limited.

As the HSBC Group engages in a wide range of commercial and investment banking, brokerage, funds management, hedging transactions and investments it is possible that companies or businesses within the HSBC Group may from time to time potentially have interests which conflict, or potentially conflict, with its customers' interests or with the duties that it owes to its customers.

The types of conflicts include (a) those arising between the interests of HSBC on the one hand and with the interests of its customers on the other, (b) those conflicts between different customers, and (c) conflicts between an employee of HSBC Group and a customer.

For example, HSBC Group may trade proprietary positions in a security when at the same time another business or entity within HSBC Group may have information about future transactions with customers in relation to that security. HSBC Group may also provide advisory and financing services to one customer in respect of a bid and seek to provide financing services to another customer in respect of the same bid. HSBC Group has therefore established comprehensive Conflict of Interest Management procedures which are designed to identify and manage such potential conflicts of interest. A key element of such procedures is that HSBC Group staff engaged in different business activities involving a potential conflict of interest must carry on those activities independently of one another.
In Japan, the Compliance Department, which is managed independently from business departments, is the responsible department for Conflict of Interest Management. The Compliance Department identifies potential conflicts of interest by monitoring the necessary business information and where applicable taking appropriate measures to manage and control conflicts of interest when they arise. These control procedures include organisational measures and administrative arrangements to safeguard the interests of customers and clients.

Where necessary, HSBC Group maintains arrangements which restrict the flow of information to certain employees in order to protect its customers' interest and to prevent improper access to customer information. Rules are also in place to prevent insider dealings by employees of HSBC Group.

In certain circumstances, HSBC Group may consider it appropriate to disclose a potential conflict of interest to a customer and obtain the customer's formal consent to proceed.

However, HSBC Group will decline to act in any circumstance where a customer declines to give consent or where it considers that the potential conflict of interest cannot be managed without risk of damage to the interest of any customer.

The scope of conflicts of interest management is the activities of The Hongkong and Shanghai Banking Corporation Limited, HSBC Securities (Japan) Co., Ltd., HSBC Asset Management (Japan) Limited and all other HSBC Group companies worldwide which engage in financial business. Please be advised that HSBC Asset Management (Japan) Limited does not share individual customer information with remaining HSBC Group companies.

Any customer requiring more details of our Conflict of Interest Management procedures should contact their Relationship Manager or other contacts at any of HSBC's offices in Japan.

As a responsible organisation the HSBC Group is committed to actively engaging in activities which contribute to the maintenance of stability and social order. It is our policy to take a firm stance against any group or organisation which engages in activities that may be deemed anti-social. Our position is in accordance with recent guidelines issued by both the Financial Services Agency and the Japan Securities Dealers Association, namely we will:

1. Resolutely oppose any attempt by ASFs to associate with us.
2. Take all reasonable measures to protect HSBC staff against the activities of ASFs during the performance of their jobs.
3. We will continue to support external parties, including the police and legal professionals, in their fight against ASFs.
4. We will use the Japanese legal system to protect our staff and our business against ASFs.

The Customer Complaint and Dispute Resolution Procedures for Type I Business, based on the Financial Instruments and Exchange Act Article 37-7, are set out below.
HSBC Securities (Japan) Co., Ltd. Limited has signed an agreement with the Financial Instruments Mediation Assistance Center ('FINMAC') with respect to the use of customer complaint and dispute resolution procedures to be provided by FINMAC, which is a Designated Dispute Resolution Body under the Financial Instruments and Exchange Act.

Disclosure pursuant to Money Lending Business Act Article 12-2-2
HSBC Securities (Japan) Co., Ltd. has signed an agreement with the Japan Financial Services Association ('Money Lending Business Association') with respect to the use of customer complaint and dispute resolution procedures to be provided by Money Lending Business Association, which is a Designated Dispute Resolution Body under the Money Lending Business Act.

Explanatory note on unregistered credit rating
(For S&P Global Ratings)

HSBC Securities (Japan) Co., Ltd.

From the viewpoint of ensuring fairness and transparency in the markets, Financial Instruments and Exchange Law has introduced the registration system for credit rating agencies. In accordance with this regulation, financial instruments business operators, etc are required to inform customers of the fact that the rating is not registered and the rationale for the registration system, etc. whenever marketing any financial products which are rated by unregistered credit rating agencies.

Rationale for the Registration System

Registered credit rating agencies are subject to the following regulations: (1) the duty of good faith; (2) the duty to maintain an operational management system which prevents conflicts of interest and ensures the fairness of the credit rating process, etc.; (3) the prohibition on giving a credit rating to a security which they hold; and (4) the duty to disclose information including to prepare and make available for public inspection the policies for credit ratings and the documents for public release and explanation. Registered credit rating agencies are also subject to supervision by the Financial Services Agency, including orders to submit information, onsite inspections and business improvement orders. However, unregistered credit rating agencies are not subject to such regulation or supervision.

Name of the Credit Rating Agency Group, etc. 

Name of the Credit Rating Agency Group:
S&P Global Ratings (“S&P”)
Name of the Registered Credit Rating Agency within the Group and its Registration Number:
S&P Global Ratings Japan Inc. (FSA Commissioner (Rating) No. 5)
S&P Global SF Japan Inc. (FSA Commissioner (Rating) No. 8)

Method of Obtaining the Information about the Summaries of the Policies and Criteria for Credit Rating

The information is published in the “Unregistered Rating Information”  (「無登録格付け情報」) which can be found in the menu under “Library/Regulation Related” (「ライブラリ･規制関連」) on the website of S&P Global Ratings.

Assumptions, Significance and Limitations of the Rating

Credit ratings assigned by S&P Global Ratings are statements of opinion on the future credit quality of specific issuers or issues as of the date they are expressed and do not indicate the probability of default or guarantee the credit of the specific issuers or issues. Credit ratings are not a recommendation to purchase, sell or hold any securities, or a statement of market liquidity or prices in the secondary market of any issues.

Credit ratings may change depending on various factors, including issuers' performance, changes in external environment, performance of underlying assets, creditworthiness of counterparties and others. S&P Global Ratings conducts rating analysis based on information it believes to be reliable and provides ratings only when it believes to have enough information in terms of quality and quantity to support its opinion. However, S&P Global Ratings does not perform an audit, due diligence or independent verification of any information it receives from issuers or other third parties, nor guarantees accuracy, completeness or timeliness of the information received or the results caused by use of such information. It should be noted that, depending on the credit ratings, there may be inherent risks associated with the limitation on available historical data.

This information is prepared as of 1 April 2022 based on sources which we believe are reliable, but we do not guarantee its accuracy or completeness. For details, please refer to the above mentioned website of S&P Global Ratings.

Explanatory note on unregistered credit rating
(For Moody’s Investors Service)

HSBC Securities (Japan) Co., Ltd.

From the viewpoint of ensuring fairness and transparency in the markets, Financial Instruments and Exchange Law has introduced the registration system for credit rating agencies. In accordance with this regulation, financial instruments business operators, etc. are required to inform customers of the fact that the rating is not registered and the rationale for the registration system, etc. whenever marketing any financial products which are rated by unregistered credit rating agencies.

Rationale for the Registration System

Registered credit rating agencies are subject to the following regulations: (1) the duty of good faith; (2) the duty to maintain an operational management system which prevents conflicts of interest and ensures the fairness of the credit rating process, etc.; (3) the prohibition on giving a credit rating to a security which they hold; and (4) the duty to disclose information including to prepare and make available for public inspection the policies for credit ratings and the documents for public release and explanation. Registered credit rating agencies are also subject to supervision by the Financial Services Agency, including orders to submit information, onsite inspections and business improvement orders. However, unregistered credit rating agencies are not subject to such regulation or supervision.

Name of the Credit Rating Agency Group, etc. 

Name of the Credit Rating Agency Group:
Moody’s Investors Service
Name of the Registered Credit Rating Agency within the Group and its Registration Number:
Moody’s Japan K.K. (FSA Commissioner (Rating) No. 2)
Moody’s SF Japan K.K. (FSA Commissioner (Rating) No. 3)
15 specified related companies＊

Method of Obtaining the Information about the Summaries of the Policies and Criteria for Credit Rating

The information is published in the “Matters Related to the Explanation of Unregistered Ratings” (「無登録格付説明関連」) in the page of “Use of Credit Ratings Given by Unregistered Companies” (「無登録業者の格付の利用」) which is displayed after clicking “Credit Rating Business” on the website of Moody’s Japan K.K. and Moody’s SF Japan K.K. ＊Specified related companies are published on the website under (「金融庁長官より指定を受けた特定関係法人一覧」).

Assumptions, Significance and Limitations of the Rating

Credit ratings are Moody’s Investors Service's (“Moody’s”) current opinions of the relative future credit risk of entities, credit commitments, or debt or debt-like securities. Moody’s defines credit risk as the risk that an entity may not meet its contractual, financial obligations as they come due and any estimated financial loss in the event of default. Credit ratings do not address any other risk, including but not limited to: liquidity risk, market value risk, or price volatility. Credit ratings do not constitute investment or financial advice, and credit ratings are not recommendations to purchase, sell, or hold particular securities. No warranty, express or implied, as to the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any such rating or other opinion or information is given or made by Moody’s in any form or manner whatsoever.

Based on the information received from issuers or from public sources, the credit risks of the issuers or obligations are assessed. Moody’s adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody’s considers to be reliable. However, Moody’s is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

This information is prepared as of 1 April 2022 based on sources which we believe are reliable, but we do not guarantee its accuracy or completeness. For details, please refer to the above website of Moody’s Japan K.K. and Moody’s SF Japan K.K.

Explanatory note on unregistered credit rating
(For Fitch Ratings)

HSBC Securities (Japan) Co., Ltd.

From the viewpoint of ensuring fairness and transparency in the markets, Financial Instruments and Exchange Act has introduced the registration system for credit rating agencies. In accordance with this regulation, financial instruments business operators, etc. are required to inform customers of the fact that the rating is not registered and the rationale for the registration system, etc. whenever marketing any financial products which are rated by unregistered credit rating agencies.

Rationale for the Registration System

Registered credit rating agencies are subject the following regulations: (1) the duty of good faith; (2) the duty to maintain an operational management system which prevents conflicts of interest and ensures the fairness of the credit rating process, etc.; (3) the prohibition on giving a credit rating to a security which they hold; and (4) the duty to disclose information including to prepare and make available for public inspection the policies for credit ratings and the documents for public release and explanation. Registered credit rating agencies are also subject to supervision by the Financial Services Agency, including orders to submit information, onsite inspections and business improvement orders. However, unregistered credit rating agencies are not subject to such regulation or supervision.

Name of the Credit Rating Agency Group, etc. 

Name of the Credit Rating Agency Group:
Fitch Ratings (“Fitch”)
Name of the Registered Credit Rating Agency within the Group and its Registration Number:
Fitch Ratings Japan Limited (FSA Commissioner (Rating) No. 7)

Method of Obtaining the Information about the Summaries of the Policies and Criteria for Credit Rating

The information is published in the “Overview of Policies etc for Credit Rating” (｢格付方針等の概要｣) in the “Regulation Related” (｢規制関連」) section on the website of Fitch Ratings Japan Limited .

Assumptions, Significance and Limitations of the Rating

Ratings assigned by Fitch are opinions based on established criteria and methodologies. Ratings are not facts, and therefore cannot be described as being "accurate" or "inaccurate". Credit ratings do not directly address any risk other than credit risk. Credit ratings do not comment on the adequacy of market price or market liquidity for rated instruments. Ratings are relative measures of risk; as a result, the assignment of ratings in the same category to entities and obligations may not fully reflect small differences in the degrees of risk. Credit ratings, as opinions on relative ranking of vulnerability to default, do not imply or convey a specific statistical probability of default.

In issuing and maintaining its ratings, Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The assignment of a rating to any issuer or any security should not be viewed as a guarantee of the accuracy, completeness, or timeliness of the information relied on in connection with the rating or the results obtained from the use of such information. If any such information should turn out to contain misrepresentations or to be otherwise misleading, the rating associated with that information may not be appropriate.  Despite any verification of current facts, ratings can be affected by future events or conditions that were not anticipated at the time a rating was issued or affirmed. 

For a detailed explanation on the assumption, significance, and limits of credit rating, please refer to the section on “Definition regarding credit rating and other forms of opinions” on Fitch’s Japanese website.

This information is prepared as of 1 April 2022 based on sources which we believe are reliable, but we do not guarantee its accuracy or completeness. For details, please refer to the above mentioned website of Fitch Ratings Japan Limited.