Former HSBC exec turns to Japan as he fights CFTC case
Former HSBC executive Christophe Rivoire is seeking assistance from Japanese authorities in obtaining evidence he needs to fight accusations brought by the United States Commodity Futures Trading Commission (CFTC).
Rivoire, who is accused of manipulation and fraud in connection with swaps related to a bond issuance, asks Japanese judicial authorities to help him in securing evidence from a Japanese company involved in the pricing call that is at the heart of the case brought against him.
On December 19, 2019, the CFTC filed a complaint in New York Southern District Court alleging that the defendant, Christophe Rivoire, violated various United States federal statutes, including the Commodities Exchange Act. The Complaint involves one transaction involving subsidiaries of HSBC Holdings plc, a British multinational investment bank and financial services company, and the Issuer.
In July 2012, HSBC served as co-underwriter and sole swap arranger on a $2 billion bond issuance and corresponding U.S. dollar interest rate swap for the Issuer. Under the terms of the Bond Issuance, the Issuer issued $2 billion 5-year obligation bonds and paid a fixed rate of interest to investors.
The Bond Issuance was priced on a conference call on July 11, 2012. Concurrently with the Bond Issuance, the Issuer simultaneously entered into an Interest Rate Swap with HSBC, where the Issuer swapped its fixed-rate payment obligations for a floating rate obligation. The Issuer entered into the Interest Rate Swap in order to manage the interest-rate risk associated with the Bond Issuance. HSBC was the Issuer’s counterparty in the Interest Rate Swap, which was priced after the Bond Issuance on the same July 11, 2012 Pricing Call. Noriyuki Ishikawa and Tetsuya Oura both participated in the Pricing Call.
The CFTC alleges that Rivoire, the head of HSBC’s North American Rates business, engaged in a scheme to manipulate the prices of U.S. dollar interest rate basis swaps with a five-year maturity, which were used to price the Interest Rate Swap. The CFTC alleges that manipulated prices were used to price the Interest Rate Swap, resulting in a more profitable transaction for HSBC and a less profitable transaction for the Issuer. Critically, the only specific victim that the CFTC identifies is the Issuer.
The Issuer’s perspective is crucial because the Issuer is the only identifiable victim of the purported manipulation scheme, and the CFTC has requested this Court grant full restitution to the Issuer in the amount that the Issuer was harmed. But only the Issuer can speak to whether the Issuer experienced harm. Thus, the evidence requested will assist the Court in evaluating whether such a harm exists and resolving the disputed issues presented in this civil action, including whether the Issuer is entitled to restitution, as requested by the CFTC.
Rivoire also seeks the testimony of Noriyuki Ishikawa, who is believed to be a current employee of the Issuer and, in July 2012, was the Deputy Director of the Capital Markets and Funding Division of the Issuer.
Rivoire also requests that Tetsuya Oura, who, in July 2012, was the Director of the Capital Markets and Funding Division of the Issuer, to be summoned and examined. Mr Oura’s perspective is seen essential to this litigation. He can speak to the Issuer’s perspective on selecting the pricing procedures for the Bond Issuance and Interest Rate Swap, which led to problems during the Pricing Call.
Additionally, since he participated in the Pricing Call, he can share his view as to whether the Pricing Call was resolved in a satisfactory manner to the Issuer. Lastly, based on his role and experience on the Transaction, Mr. Oura can also speak to the critical question in this litigation of whether the Issuer experienced any harm.
The CFTC is also seeking international judicial assistance in this case.