(Bloomberg) -- The former head of HSBC Holdings Plc’s North American interest rates business was sued for fraud by the U.S. Commodity Futures Trading Commission.
Christophe Rivoire helped manipulate the price of an interest rate swap between the bank and a bond issuer, the CFTC said in a complaint filed Friday in Manhattan federal court. The agency claimed the issuer had negotiated with the bank to price a bond and related swaps using U.S. dollar interest rate basis swaps with a five-year maturity.
According to the CFTC, Rivoire in July 2012 directed a trader he supervised to trade in a way to reduce the prices for the five-year basis swaps to make the transaction more profitable for HSBC. As a result, the trader, who isn’t named, worked with a broker at an unidentified interdealer broker firm to time the sale of a large quantity of swaps in a way that would manipulate the prices as displayed on broker screens.
Rivoire falsely told the issuer “Obviously we are not controlling the screen,” according to the CFTC. The move reduced the value of the transaction for the issuer and deceived other market participants, the CFTC said in its complaint.
The CFTC is seeking an order imposing civil fines and a trading ban on Rivoire.
“The CFTC’s unproven allegations rest on disputed facts and novel, untested legal theories that are at odds with decades of legal precedent,” Jim Benjamin and Parvin Moyne, attorneys representing Rivoire, said in a statement. “Christophe Rivoire is a highly respected market professional, and we intend to vigorously defend him against these charges.”
HSBC called the case “a historical matter.”
“In the last several years, we have significantly strengthened our compliance procedures and controls and reinforce the high standards of conduct expected of our people,” the company said in a statement. “HSBC is committed to delivering fair outcomes for customers and protecting the orderly and transparent operation of markets.”
Finra records show that the CFTC notified HSBC in May 2016 that it was investigating the swap transaction and had subpoenaed information relating to Rivoire. HSBC said at the time that it was cooperating with the investigation.
The case is Commodity Futures Trading Commission v. Rivoire, 19-cv-11701, U.S. District Court, Southern District of New York (Manhattan).
(Updates with comment from Rivoire’s attorneys in the sixth paragraph.)
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