Judge: HSBC should reveal reports on Madoff risk

HSBC Holdings Plc, Europe's biggest bank, should turn over internal reviews of potential fraud and other operational risks at Bernard Madoff's business from 2006 and 2008, a New York judge ruled.

Locally, HSBC has operations in Mettawa.

U.S. Bankruptcy Judge Burton Lifland, in an Aug. 17 ruling, agreed to ask the High Court in London to order HSBC to hand over reports, contracts, audio recordings and documents related to examinations conducted by an affiliate of KPMG International. HSBC acted as custodian bank for several funds that invested with the con man.

The last review was commissioned by HSBC in September 2008, about three months before Madoff's arrest, according to the ruling. London-based HSBC and trustee Irving Picard in New York reached an agreement on which documents should be turned over if the order is issued, Manhattan court filings show.

Picard is suing hedge funds and other parties that profited from the $65 billion fraud to repay victims. Madoff, 72, pleaded guilty last year and is serving a 150-year sentence.

HSBC spokesman Adrian Russell said the company can't comment on ongoing litigation.

HSBC finedThe Financial Industry Regulatory Authority fined a U.S. unit of HSBC Holdings Plc $375,000 for recommending unsuitable sales of inverse floating rate collateralized mortgage obligations to retail customers.HSBC Securities "failed to adequately supervise the suitability of the CMO sales and fully explain the risks of an inverse floating rate or other risky CMO investment to its customers," Washington-based Finra said yesterday in a statement.The company agreed to settle without admitting or denying wrongdoing, said Finra, the industry-funded regulator of U.S. brokerages.