Calculation
of Registration Fee
Title of Each Class of
Securities Offered
|
|
Maximum Aggregate
Offering Price
|
|
Amount of
Registration Fee
(1)
|
Debt Securities
|
|
$5,846,000
|
|
$797.39
|
(1)
Calculated in accordance with Rule 457(r) of
the Securities Act of 1933, as amended.
|
Filed Pursuant
to Rule 424(b)(2)
Registration No. 333-180289
PRICING SUPPLEMENT
Dated November 15,
2012
(To Prospectus dated
March 22, 2012,
Prospectus Supplement dated March 22, 2012
and
ETF Underlying Supplement dated March 22, 2012)
|
Structured
Investments
|
|
HSBC USA Inc.
$5,846,000
Knock-Out Buffer Notes Linked to a Basket of the iShares
®
MSCI Brazil Index Fund and the iShares
®
MSCI Mexico Investable Market Index Fund due May 20, 2014
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General
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·
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Terms used in this pricing supplement are described or defined herein and in the accompanying ETF
Underlying Supplement, prospectus supplement and prospectus. The Notes offered will have the terms described in the accompanying
ETF Underlying Supplement, prospectus supplement and prospectus as supplemented by this pricing supplement.
The Notes do not
guarantee any return of principal, and you may lose up to 100% of your initial investment. The Notes will not bear interest.
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·
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This pricing supplement relates to a single note offering. The purchaser of a Note will acquire
a security linked to the Basket described below.
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Although the offering relates to a Basket, you should not construe that fact as a recommendation
as to the merits of acquiring an investment linked to the Basket, any Basket Component or any component security held by a Basket
Component or as to the suitability of an investment in the Notes.
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·
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Senior unsecured debt obligations of HSBC USA Inc. maturing May 20, 2014.
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·
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Minimum denominations of $10,000 and integral multiples of $1,000 in excess thereof.
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If the terms of the Notes set forth below are inconsistent with those described in the accompanying
ETF Underlying Supplement, prospectus supplement and prospectus, the terms set forth below will supersede.
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·
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Any payment on the Notes is subject to the Issuer’s credit risk, and you have no ability
to pursue the issuer of any Basket Component for payment. The Issuer has not undertaken any independent review of, or made any
due diligence inquiry with respect to, the publicly available information provided herein regarding the Basket Components.
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Key Terms
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Issuer:
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HSBC USA Inc.
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Basket:
|
The Notes are linked to an unequally weighted Basket consisting of the iShares
®
MSCI Brazil Index Fund (“EWZ”) and the iShares
®
MSCI Mexico Investable Market Index Fund (“EWW”) (each a “Basket Component” or an “index fund” and together, the “index funds” or “Basket Components”).
|
|
Basket Component
|
Bloomberg Symbol
|
Initial Price
|
Component Weighting
|
|
iShares
®
MSCI Brazil Index Fund
|
EWZ
|
$51.24
|
70%
|
|
iShares
®
MSCI Mexico Investable Market Index Fund
|
EWW
|
$63.43
|
30%
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Knock-Out Event:
|
A Knock-Out Event occurs if on the Final Valuation Date the Basket has depreciated, compared to the Initial Basket Level, by a percentage that is more than the Knock-Out Buffer Amount.
|
Knock-Out Buffer Amount:
|
14%
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Contingent Minimum Return:
|
0%
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Principal Amount:
|
$1,000 per Note.
|
Trade Date:
|
November 15, 2012
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Pricing Date:
|
November 15, 2012
|
Original Issue Date:
|
November 20, 2012
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Final Valuation Date:
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May 15, 2014, subject to adjustment as described herein and in the accompanying ETF Underlying Supplement.
|
Maturity Date:
|
May 20, 2014. The Maturity Date is subject to further adjustment as described under “Additional Note Terms — Market Disruption Events” in the accompanying ETF Underlying Supplement.
|
Payment at Maturity:
|
If a Knock-Out Event has occurred,
you will receive a cash payment on the Maturity Date that will reflect the performance of the Basket. Under these circumstances, your Payment at Maturity per $1,000 Principal Amount of Notes will be calculated as follows:
|
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$1,000 + ($1,000 × Basket Return)
|
|
If a Knock-Out Event has occurred, you will lose some or all of your investment.
This means that if the Basket Return is -100.00%, you will lose your entire investment.
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If a Knock-Out Event has not occurred,
you will receive a cash payment on the Maturity Date that will reflect the performance of the Basket, subject to the Contingent Minimum Return. If a Knock-Out Event has not occurred, your Payment at Maturity per $1,000 Principal Amount of Notes will equal $1,000 plus the product of (a) $1,000 multiplied by (b) the greater of (i) the Basket Return and (ii) the Contingent Minimum Return. For additional clarification, please see “What is the Total Return on the Notes at Maturity Assuming a Range of Performances for the Basket?” herein.
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Basket Return:
|
The quotient, expressed as a percentage, calculated as follows:
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Final Basket Level – Initial Basket Level
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Initial Basket Level
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Initial Basket Level:
|
Set equal to 100 on the Pricing Date.
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Final Basket Level:
|
The level of the Basket on the Final Valuation Date, which will be calculated as follows:
|
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100 × (1 + the sum of the Weighted Basket Component Returns of the Basket Components)
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Weighted Basket
|
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Component Return:
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With respect to each Basket Component, the product of (a) the Basket Component Return of that Basket Component times (b) its Component Weighting
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Basket Component Return:
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With respect to each Basket Component, the performance of that Basket Component from the Initial Price to the Final Price, calculated as follows:
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Final Price – Initial Price
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Initial Price
|
Initial Price:
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$51.24 for the EWZ and $63.43 for the EWW, which were the Official Closing Prices of the Basket Components on the Pricing Date.
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Final Price:
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The Official Closing Price of a Basket Component on the Final Valuation Date.
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Official Closing Price:
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The Official Closing Price of a Basket Component on any scheduled trading day as determined by the Calculation Agent based upon the value displayed on Bloomberg Professional
®
service page “EWZ UP <EQUITY>” for the EWZ, or “EWW UP <EQUITY>” for the EWW, or any respective successor page on the Bloomberg Professional
®
service or any successor service, as applicable, adjusted by the Calculation Agent as described under “Additional Note Terms — Antidilution and Reorganization Adjustments” in the accompanying ETF Underlying Supplement.
|
Calculation Agent:
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HSBC USA Inc. or one of its affiliates
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CUSIP/ISIN:
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40432X3P4/US40432X3P40
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Form of Notes:
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Book-Entry
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Listing:
|
The Notes will not be listed on any U.S. securities exchange or quotation system.
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Investment in the Notes involves
certain risks. You should refer to “Selected Risk Considerations” beginning on page 5 of this document and “Risk
Factors” beginning on page S-2 of the ETF Underlying Supplement and page S-3 of the prospectus supplement.
Neither the U.S. Securities
and Exchange Commission, or the SEC, nor any state securities commission has approved or disapproved of the Notes or determined
that this pricing supplement, or the accompanying ETF Underlying Supplement, prospectus supplement and prospectus, is truthful
or complete. Any representation to the contrary is a criminal offense.
HSBC Securities (USA) Inc.
or another of our affiliates or agents may use this pricing supplement in market-making transactions in any Notes after their initial
sale.
Unless we or our agent informs you otherwise in the confirmation of sale, this pricing supplement will be used in a market-making
transaction.
HSBC Securities (USA) Inc., an affiliate of ours, will purchase the Notes from us for distribution to the placement
agent. See “Supplemental Plan of Distribution (Conflicts of Interest)” on the last page of this pricing supplement.
J.P. Morgan Securities LLC
and certain of its registered broker-dealer affiliates are purchasing the Notes for resale.
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Price to Public
|
Fees and Commissions
|
Proceeds to Issuer
|
Per Note
|
$1,000.00
|
$12.50
|
$987.50
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Total
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$5,846,000.00
|
$73,075.00
|
$5,772,925.00
|
The
Notes:
Are Not FDIC Insured
|
Are Not Bank Guaranteed
|
May Lose Value
|
JPMorgan
Placement Agent
November 15, 2012
Additional Terms Specific to the Notes
This pricing supplement
relates to a single note offering linked to the Basket identified on the cover page. The purchaser of a Note will acquire a senior
unsecured debt security linked to the Basket. Although the Note offering relates only to the Basket identified on the cover page,
you should not construe that fact as a recommendation as to the merits of acquiring an investment linked to the Basket, any Basket
Component or any security held by a Basket Component, or as to the suitability of an investment in the Notes.
You should read
this document together with the prospectus dated March 22, 2012, the prospectus supplement dated March 22, 2012 and the ETF Underlying
Supplement dated March 22, 2012. If the terms of the Notes offered hereby are inconsistent with those described in the accompanying
ETF Underlying Supplement, prospectus supplement or prospectus, the terms described in this pricing supplement shall control. You
should carefully consider, among other things, the matters set forth in “Selected Risk Considerations” beginning on
page 5 of this pricing supplement and “Risk Factors” beginning on page S-2 of the ETF Underlying Supplement and page
S-3 of the prospectus supplement, as the Notes involve risks not associated with conventional debt securities. We urge you to consult
your investment, legal, tax, accounting and other advisors before you invest in the Notes. As used herein, references to the “Issuer”,
“HSBC”, “we”, “us” and “our” are to HSBC USA Inc.
HSBC has filed a
registration statement (including a prospectus, a prospectus supplement and the ETF Underlying Supplement) with the SEC for the
offering to which this pricing supplement relates. Before you invest, you should read the prospectus, prospectus supplement and
ETF Underlying Supplement in that registration statement and other documents HSBC has filed with the SEC for more complete information
about HSBC and this offering. You may get these documents for free by visiting EDGAR on the SEC’s web site at www.sec.gov.
Alternatively, HSBC Securities (USA) Inc. or any dealer participating in this offering will arrange to send you the prospectus,
prospectus supplement and the ETF Underlying Supplement if you request them by calling toll-free 1-866-811-8049.
You may also obtain:
Summary
The four charts below provide a summary
of the Notes, including Note characteristics and risk considerations as well as an illustrative diagram and table reflecting hypothetical
returns at maturity. These charts should be reviewed together with the disclosure regarding the Notes contained in this pricing
supplement as well as in the accompanying prospectus, prospectus supplement and ETF Underlying Supplement.
The following charts illustrate the hypothetical
total return at maturity on the Notes. The “total return” as used in this pricing supplement is the number, expressed
as a percentage, that results from comparing the Payment at Maturity per $1,000 Principal Amount of Notes to $1,000. The hypothetical
total returns set forth below reflect the Initial Basket Level of 100, the Knock-Out Buffer Amount of 14%, and the Contingent Minimum
Return of 0%. The hypothetical total returns set forth below are for illustrative purposes only and may not be the actual total
returns applicable to a purchaser of the Notes. The numbers appearing in the following table and examples have been rounded for
ease of analysis.
Selected Purchase Considerations
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·
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APPRECIATION POTENTIAL
— The Notes provide the opportunity to participate in the appreciation
of the Basket at maturity.
If a Knock-Out Event has not occurred,
you will receive at maturity at least the Principal
Amount. Because the Notes are our senior unsecured debt obligations, payment of any amount at maturity is subject to our ability
to pay our obligations as they become due.
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THE CONTINGENT MINIMUM RETURN APPLIES ONLY IF A KNOCK-OUT EVENT HAS NOT OCCURRED
—
If a Knock-Out Event has not occurred,
you will receive at least the Principal Amount at maturity even if the Basket
has depreciated compared to the Initial Basket Level.
If a Knock-Out Event has occurred,
you will lose 1.00% of your
Principal Amount for every 1.00% that the Basket has depreciated as compared to the Initial Basket Level. If a Knock-Out Event
has occurred and the Basket is -100.00%, you will lose your entire investment.
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TAX TREATMENT
— There is no direct legal authority as to the proper tax treatment
of the Notes, and therefore significant aspects of the tax treatment of the Notes are uncertain as to both the timing and character
of any inclusion in income in respect of the Notes. Under one approach, a Note should be treated as a pre-paid executory contract
with respect to the Basket. We intend to treat the Notes consistent with this approach. Pursuant to the terms of the Notes, you
agree to treat the Notes under this approach for all U.S. federal income tax purposes. Subject to the limitations described
therein, and based on certain factual representations received from us, in the opinion of our special U.S. tax counsel, Morrison
& Foerster LLP, it is reasonable to treat a Note as a pre-paid executory contract with respect to the Basket. Pursuant
to this approach, and subject to the discussion below regarding “constructive ownership transactions”, we do not intend
to report any income or gain with respect to the Notes prior to their maturity or an earlier sale or exchange and we intend to
treat any gain or loss upon maturity or an earlier sale or exchange as long-term capital gain or loss, provided that you have held
the Note for more than one year at such time for U.S. federal income tax purposes.
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Despite the foregoing,
U.S. holders (as defined under “U.S. Federal Income Tax Considerations” in the accompanying prospectus supplement)
should be aware that the Internal Revenue Code of 1986, as amended (the “Code”) contains a provision, Section 1260
of the Code, which sets forth rules which are applicable to what it refers to as “constructive ownership transactions.”
Due to the manner in which it is drafted, the precise applicability of Section 1260 of the Code to any particular transaction is
often uncertain. In general, a “constructive ownership transaction” includes a contract under which an investor will
receive payment equal to or credit for the future value of any equity interest in a regulated investment company (such as shares
of the Basket Components (the “Underlying Shares”)). Under the “constructive ownership” rules, if an investment
in the Notes is treated as a “constructive ownership transaction,” any long-term capital gain recognized by a U.S.
holder in respect of a Note will be recharacterized as ordinary income to the extent such gain exceeds the amount of “net
underlying long-term capital gain” (as defined in Section 1260 of the Code) of the U.S. holder determined as if the U.S.
holder had acquired the Underlying Shares on the Original Issue Date of the Note at fair market value and sold them at fair market
value on the Maturity Date (if the Note was held until the Maturity Date) or on the date of sale or exchange of the Note (if the
Note was sold or exchanged prior to the Maturity Date) (the “Excess Gain”). In addition, an interest charge will also
apply to any deemed underpayment of tax in respect of any Excess Gain to the extent such gain would have resulted in gross
income inclusion for the U.S. holder in taxable years prior to the taxable year of the sale, exchange or maturity of the Note (assuming
such income accrued at a constant rate equal to the applicable federal rate as of the date of sale, exchange or maturity of the
Note).
Although the
matter is not clear, there exists a substantial risk that an investment in the Notes will be treated as a “constructive ownership
transaction.” If such treatment applies, it is not entirely clear to what extent any long-term capital gain recognized by
a U.S. holder in respect of a Note will be recharacterized as ordinary income. It is possible, for example, that the amount of
the Excess Gain (if any) that would be recharacterized as ordinary income in respect of each Note will equal the excess of (i)
any long-term capital gain recognized by the U.S. holder in respect of such a Note over (ii) the “net underlying long-term
capital gain” such U.S. holder would have had if such U.S. holder had acquired a number of the Underlying Shares at fair
market value on the Original Issue Date of such Note for an amount equal to the “issue price” of the Note and, upon
the date of sale, exchange or maturity of the Note, sold such Underlying Shares at fair market value (which would reflect the percentage
increase in the value of the Underlying Shares over the term of the Note). Accordingly, U.S. holders should consult their tax advisors
regarding the potential application of the “constructive ownership” rules.
We will not attempt
to ascertain whether the issuer of any stock owned by the relevant Basket Component would be treated as a “passive foreign
investment company” (“PFIC”) or United States real property holding corporation (“USRPHC”), both
as defined for U.S. federal income tax purposes. In the event that the issuer of any stock owned by the relevant Basket Component
were so, certain adverse U.S. federal income tax consequences might apply. You should refer to information filed with the SEC or
other authorities by the issuers of stock owned by the relevant Basket Component and consult your tax advisor regarding the possible
consequences to you, if any, in the event that one or more issuers of stock owned by the relevant Basket Component is or becomes
a PFIC or a USRPHC.
For a discussion
of the U.S. federal income tax consequences of your investment in a Note, please see the discussion under “U.S. Federal Income
Tax Considerations” in the accompanying prospectus supplement.
Selected Risk Considerations
An investment in the Notes involves significant
risks. Investing in the Notes is not equivalent to investing directly in the Basket, any Basket Component, or any of the component
securities of a Basket Component. These risks are explained in more detail in the “Risk Factors” sections of the accompanying
ETF Underlying Supplement and prospectus supplement.
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·
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SUITABILITY OF THE NOTES FOR INVESTMENT
— You should only reach a decision to invest
in the Notes after carefully considering, with your advisors, the suitability of the Notes in light of your investment objectives
and the information set out in this pricing supplement. Neither HSBC nor any dealer participating in the offering makes any recommendation
as to the suitability of the Notes for investment.
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YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS
— The Notes do not guarantee any
return of principal. The return on the Notes at maturity is linked to the performance of the Basket and will depend on whether
a Knock-Out Event has occurred and whether, and the extent to which, the Basket appreciates or depreciates. If the Basket has depreciated,
compared to the Initial Basket Level, by more than the Knock-Out Buffer Amount of 14%, a Knock-Out Event has occurred, and the
benefit provided by the Knock-Out Buffer Amount will terminate.
IF A KNOCK-OUT EVENT OCCURS,
YOU MAY LOSE UP TO 100%
OF YOUR INVESTMENT
.
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THE NOTES ARE SUBJECT TO THE CREDIT RISK OF HSBC USA INC.
— The Notes are senior unsecured
debt obligations of the Issuer, HSBC, and are not, either directly or indirectly, an obligation of any third party. As further
described in the accompanying prospectus supplement and prospectus, the Notes will rank on par with all of the other unsecured
and unsubordinated debt obligations of HSBC, except such obligations as may be preferred by operation of law. Any payment to be
made on the Notes, including any return of principal at maturity, depends on the ability of HSBC to satisfy its obligations as
they come due. As a result, the actual and perceived creditworthiness of HSBC may affect the market value of the Notes and, in
the event HSBC were to default on its obligations, you may not receive the amounts owed to you under the terms of the Notes.
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YOUR ABILITY TO RECEIVE THE CONTINGENT MINIMUM RETURN MAY TERMINATE ON THE FINAL VALUATION DATE
— If, on the Final Valuation Date, the Basket has depreciated compared to the Initial Basket Level by more than the Knock-Out
Buffer Amount of 14%, you will be fully exposed to the depreciation in the Basket and will not be entitled to receive the benefit
provided by the Contingent Minimum Return on the Notes. Under these circumstances, you will lose 1.00% of the Principal Amount
of your investment for every 1.00% depreciation of the Basket as compared to the Initial Basket Level. As a result, you may lose
some or all of your investment. Your return on the Notes may not reflect the return you would receive on a conventional fixed or
floating rate debt instrument with a comparable term to maturity issued by HSBC or any other issuer with a similar credit rating.
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CHANGES IN THE VALUES OF THE BASKET COMPONENTS MAY OFFSET EACH OTHER
— Movements in
the prices of the Basket Components may not correlate with each other. At a time when the price of one of the Basket Component
increases, the price of the other Basket Component may not increase as much or may even decline. Therefore, in calculating the
Basket Return, increases in the price of one Basket component may be moderated, or more than offset, by lesser increases or declines
in the price of the other Basket Component. This affect is further amplified by the differing weights of the Basket Components.
A more heavily weighted Basket Component will have a larger impact than a Basket Component with a lesser weightings
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THE PAYMENT FORMULA FOR THE NOTES WILL NOT TAKE INTO ACCOUNT ALL DEVELOPMENTS IN THE BASKET
COMPONENTS
— Changes in the prices of the Basket Components during the term of the Notes other than on the Final Valuation
Date may not be reflected in the calculation of the Payment at Maturity. The Basket Return will be calculated only as of the Final
Valuation Date. As a result, the Basket Return may be less than zero even if the Basket Components had moved favorably at certain
times during the term of the Notes before moving to an unfavorable level on the Final Valuation Date.
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Potentially Inconsistent Research, Opinions or Recommendations
by HSBC and JPMorgan
— HSBC, JPMorgan, or our respective respective affiliates may publish research, express opinions
or provide recommendations that are inconsistent with investing in or holding the Notes and which may be revised at any time. Any
such research, opinions or recommendations could affect the prices of the Basket Components, and therefore, the market value of
the Notes.
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CERTAIN BUILT-IN COSTS ARE LIKELY TO ADVERSELY AFFECT THE VALUE OF THE NOTES PRIOR TO MATURITY
— While the Payment at Maturity described in this pricing supplement is based on the full Principal Amount of your Notes,
the original issue price of the Notes includes the placement agent’s commission and the estimated cost of hedging our obligations
under the Notes through one or more of our affiliates. As a result, the price, if any, at which HSBC Securities (USA) Inc. will
be willing to purchase Notes from you in secondary market transactions, if at all, will likely be lower than the original issue
price, and any sale of Notes by you prior to the Maturity Date could result in a substantial loss to you. The Notes are not designed
to be short-term trading instruments. Accordingly, you should be able and willing to hold your Notes to maturity.
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There is limited anti-dilution protection
— The Calculation Agent will adjust the Final Price, for certain events affecting the shares of a Basket Component, such
as stock splits and corporate actions which may affect the price of that
Basket Component. The Calculation Agent is not required to make an adjustment for every corporate action which affects the
shares of a Basket Component. If an event occurs that does not require the Calculation Agent to adjust the price of the shares
of that Basket Component, the market price of the Notes and the Payment at Maturity may be materially and adversely affected. See
“Additional Notes Terms—Antidilution and Reorganization Adjustments” on page S-54 of the accompanying ETF Underlying
Supplement.
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AN INVESTMENT IN THE NOTES IS SUBJECT TO RISKS ASSOCIATED WITH FOREIGN SECURITIES MARKETS
—
The stocks included in the MSCI Brazil Index and the
MSCI Mexico Investable Market Index, which are the underlying
indices for the EWZ and the EWW, respectively, and that are generally tracked by the Basket Components have been issued by companies
in Brazil and Mexico, respectively. As a result, the trading prices of shares of the EWZ and the EWW are expected to
be affected by factors affecting securities markets in Brazil and Mexico, respectively.
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Investments
in securities linked to the value of foreign securities markets involve certain risk. Foreign securities markets may
be more volatile than U.S. or other securities markets and may be affected by market developments in different ways than U.S.
or other securities markets. Also, there generally may be less publicly available information about companies in foreign
securities markets than about U.S. companies, and companies in foreign securities markets are subject to accounting, auditing
and financial reporting standards and requirements that differ from those applicable to U.S. companies.
Securities prices
outside the United States are subject to political, economic, financial and social factors that apply in foreign countries. These
factors, which could negatively affect foreign securities markets, include the possibility of changes in a foreign government’s
economic and fiscal policies, the possible imposition of, or changes in, currency exchange laws or other laws or restrictions applicable
to foreign companies or investments in foreign equity securities
and
the possibility of fluctuations in the rate of exchange between currencies. Moreover, foreign economies may differ favorably
or unfavorably from the United States economy in important respects such as growth of gross national product, rate of inflation,
capital reinvestment, resources and self-sufficiency.
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AN INVESTMENT IN THE NOTES IS SUBJECT TO CURRENCY EXCHANGE RISK
— The
prices of the stocks held by each Basket Component are converted into U.S. dollars for purposes of calculating the applicable net
asset value of such Index Fund. As a result, the Notes will be exposed to currency exchange rate risk with respect to each of the
Brazilian real and the Mexican peso. Your net exposure will depend on the extent to which those currencies strengthen or weaken
against the U.S. dollar. If the U.S. dollar strengthens against one or both of those currencies, the value of the applicable Basket
Component will be adversely affected.
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The Value of Shares of A BASKET COMPONENT may not Completely
Track the Value of ITS Underlying index
— Although the trading characteristics and valuations of shares of a Basket
Component will usually mirror the characteristics and valuations of its underlying index, the value of the shares of that Basket
Component may not completely track the level of its underlying index. A Basket Component may reflect transaction costs and fees
that are not included in the calculation of its underlying index. Additionally, because a Basket Component may not actually hold
all of the stocks comprising its underlying index but invests in a representative sample of securities which have a similar investment
profile as the stocks comprising its underlying index, that Basket Component may not fully replicate the performance of its underlying
index.
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Management Risk
— The Basket Components
are not managed according to traditional methods of ‘‘active’’ investment management, which involve the
buying and selling of securities based on economic, financial and market analysis and investment judgment. Instead, each Basket
Component, utilizing a ‘‘passive’’ or indexing investment approach, attempts to approximate the investment
performance of its underlying index by investing in a portfolio of securities that generally replicate its underlying index. Therefore,
unless a specific security is removed from its underlying index, a Basket Component generally would not sell a security because
the security’s issuer was in financial trouble. In addition, a Basket Component is subject to the risk that the investment
strategy of the investment adviser may not produce the intended results.
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NO INTEREST OR DIVIDEND PAYMENTS OR VOTING RIGHTS
— As a holder of the Notes, you
will not receive interest payments, and you will not have voting rights or rights to receive cash dividends or other distributions
or other rights that holders of shares of a Basket Component or shares of the securities held by a Basket Component would have.
In addition, the Reference Asset Issuer of any Basket Component and the issuers of the securities held by any Basket Component
will not have any obligation to consider your interests as a holder of the Notes in taking any corporate action that might affect
the price of that Basket Component and the value of the Notes.
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THE NOTES LACK LIQUIDITY
— The Notes will not be listed on any securities exchange.
HSBC Securities (USA) Inc. may offer to purchase the Notes in the secondary market. However, it is not required to do so and may
cease making such offers at any time if at all. Because other dealers are not likely to make a secondary market for the Notes,
the price at which you may be able to trade your Notes is likely to depend on the price, if any, at which HSBC Securities (USA)
Inc. is willing to buy the Notes. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade
or sell the Notes easily.
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POTENTIAL CONFLICTS
— HSBC and its affiliates play a variety of roles in connection
with the issuance of the Notes, including acting as Calculation Agent and hedging its obligations under the Notes. In performing
these duties, the economic interests of the Calculation Agent and other affiliates of HSBC are potentially adverse to your interests
as an investor in the Notes. HSBC will not have any obligation to consider your interests as a holder of the Notes in taking any
corporate action that might affect the prices of the Basket Components and the value of the Notes.
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The Notes are Not Insured by any Governmental Agency
of the United States or any Other Jurisdiction
— The Notes are not deposit liabilities or other obligations of
a bank and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency or program of the United
States or any other jurisdiction. An investment in the Notes is subject to the credit risk of HSBC, and in the event that HSBC
is unable to pay its obligations as they become due, you may not receive the full Payment at Maturity of the Notes.
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·
|
HISTORICAL PERFORMANCE OF THE BASKET COMPONENTS SHOULD NOT BE TAKEN AS AN INDICATION OF THE
FUTURE PERFORMANCE OF THE BASKET COMPONENTS DURING THE TERM OF THE NOTES
— It is impossible to predict whether any of
the Official Closing Prices for the Basket Components will rise or fall. The Basket Components will be influenced by complex and
interrelated political, economic, financial and other factors.
|
|
·
|
MARKET DISRUPTIONS MAY ADVERSELY AFFECT YOUR RETURN
— The Calculation Agent may, in
its sole discretion, determine that the markets have been affected in a manner that prevents it from valuing the Basket Components
or determining the Basket Return in the manner described herein, and calculating the amount that we are required to pay you at
maturity, or from properly hedging its obligations under the Notes. These events may include disruptions or suspensions of trading
in the markets of one or more Basket Components. If the Calculation Agent, in its sole discretion, determines that any of these
events occurs as to a Basket Component, the Calculation Agent will determine the Final Price of that Basket Component and the Basket
Return in good faith and in a commercially reasonable manner, and may postpone the Final Valuation Date and the Maturity Date.
Any of these activities may adversely affect the return on your Notes.
|
|
·
|
MANY ECONOMIC AND MARKET FACTORS WILL IMPACT THE VALUE OF THE NOTES
— In addition
to the Official Closing Prices of the Basket Components on any day, the value of the Notes will be affected by a number of economic
and market factors that may either offset or magnify each other, including:
|
|
·
|
the actual and expected volatility of each Basket Component;
|
|
·
|
the time to maturity of the Notes;
|
|
·
|
the dividend rate on the equity securities held by the Basket Components or comprising the underlying
indices;
|
|
·
|
interest and yield rates in the market generally;
|
|
·
|
a variety of economic, financial, political, regulatory or judicial events
that affect the equity securities held by the Basket Components or the stock markets generally; and
|
|
·
|
our creditworthiness, including actual or anticipated downgrades in our credit ratings.
|
What Is the Total Return on the Notes at
Maturity Assuming a Range of Performances for the Basket?
The following
table illustrates the hypothetical total return at maturity on the Notes. The “total return,” as used in this pricing
supplement, is the number, expressed as a percentage, that results from comparing the Payment at Maturity per $1,000 Principal
Amount of Notes to $1,000. The hypothetical total returns set forth below reflect the Knock-Out Buffer Amount of 14%, the Contingent
Minimum Return of 0% and the Initial Basket Level of 100. The hypothetical total returns set forth below are for illustrative purposes
only, and may not be the actual total returns applicable to a purchaser of the Notes. The numbers appearing in the following table
and examples have been rounded for ease of analysis.
Hypothetical Final Basket
Level
|
Hypothetical Basket Return
|
Hypothetical
Total Return
on the Notes
|
200.00
|
100.00%
|
100.00%
|
180.00
|
80.00%
|
80.00%
|
160.00
|
60.00%
|
60.00%
|
150.00
|
50.00%
|
50.00%
|
140.00
|
40.00%
|
40.00%
|
130.00
|
30.00%
|
30.00%
|
120.00
|
20.00%
|
20.00%
|
115.00
|
15.00%
|
15.00%
|
110.00
|
10.00%
|
10.00%
|
105.00
|
5.00%
|
5.00%
|
100.00
|
0.00%
|
0.00%
|
98.00
|
-2.00%
|
0.00%
|
95.00
|
-5.00%
|
0.00%
|
93.00
|
-7.00%
|
0.00%
|
86.00
|
-14.00%
|
0.00%
|
80.00
|
-20.00%
|
-20.00%
|
70.00
|
-30.00%
|
-30.00%
|
60.00
|
-40.00%
|
-40.00%
|
50.00
|
-50.00%
|
-50.00%
|
40.00
|
-60.00%
|
-60.00%
|
20.00
|
-80.00%
|
-80.00%
|
0.00
|
-100.00%
|
-100.00%
|
Hypothetical Examples of Amounts Payable
at Maturity
The following examples illustrate how
the total returns set forth in the table above are calculated.
Example 1: A Knock-Out Event has not
occurred and the Basket depreciates from the Initial Basket Level of 100 to a hypothetical Final Basket Level of 95.
Because
a Knock-Out Event has not occurred and the Basket Return of -5% is less than the Contingent Minimum Return of 0%, the investor
benefits from the Contingent Minimum Return and receives a Payment at Maturity of $1,000 per $1,000 Principal Amount of Notes.
$1,000 + ($1,000
× 0%) = $1,000
Example 2: A Knock-Out Event has not
occurred and the Basket appreciates from the Initial Basket Level of 100 to a hypothetical Final Basket Level of 120.
Because
a Knock-Out Event has not occurred and the Basket Return of 20% is greater than the Contingent Minimum Return of 0%, the investor
receives a Payment at Maturity of $1,200 per $1,000 Principal Amount of Notes, calculated as follows:
$1,000 + ($1,000
× 20%) = $1,200
Example 3: A Knock-Out Event has occurred
and the Basket depreciates from the Initial Basket Level of 100 to a hypothetical Final Basket Level of 60.
Because a Knock-Out
Event has occurred and the Basket decreases by more than the Knock-Out Buffer Amount, the investor is exposed to the negative performance
of the Basket and receives a Payment at Maturity of $600 per $1,000 Principal Amount of Notes, calculated as follows:
$1,000 + ($1,000
× -40%) = $600
Description
of the Basket Components
The
iShares
®
MSCI Brazil Index Fund
The
EWZ seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses,
of the MSCI Brazil Index. The MSCI Brazil Index was developed by MSCI Inc. (“MSCI”) as an equity benchmark for Brazilian
stock performance, and is designed to measure equity market performance in Brazil. The EWZ uses a representative sampling strategy
to try to track the MSCI Brazil Index. The EWZ will at all times invest at least 80% of its assets in the securities of the MSCI
Brazil Index and ADRs based on securities of the MSCI Brazil Index, and may invest the remainder of its assets in securities not
held by the MSCI Brazil Index, but which BFA believes will help the EWZ track its underlying index. The EWZ also may invest its
other assets in securities not in the MSCI Brazil Index, including futures contracts, options on futures contracts, options and
swaps related to the MSCI Brazil Index, as well as cash and cash equivalents, including shares of money market funds affiliated
with BlackRock Fund Advisors (
“
BFA”) or its affiliates.
For more information
about the EWZ, see “The iShares
®
MSCI Brazil Index Fund” beginning on page S-18 of the accompanying
ETF Underlying Supplement.
The
iShares
®
MSCI Mexico Investable Market Index Fund
The EWW seeks to provide investment results
that correspond generally to the price and yield performance, before fees and expenses, of the MSCI Mexico Investable Market Index.
The MSCI Mexico Investable Market Index was developed by MSCI to represent the performance of the Mexican market that is available
to international investors.
The EWW uses a representative sampling
strategy to try to track the MSCI Mexico Investable Market Index. The EWW will at all times invest at least 80% of its assets in
the securities of the MSCI Mexico Investable Market Index and ADRs based on securities of the MSCI Mexico Investable Market Index,
and may invest the remainder of its assets in securities not held by the MSCI Mexico Investable Market Index, but which BFA believes
will help the EWW track the MSCI Mexico Investable Market Index. The EWW also may invest its other assets in securities not in
the MSCI Mexico Investable Market Index, including futures contracts, options on futures contracts, options and swaps related to
its underlying index, as well as cash and cash equivalents, including shares of money market funds affiliated with BFA or its affiliates.
For more information about the EWW, see
“The iShares
®
MSCI Mexico Investable Market Index Fund” beginning on page S-15 of the accompanying ETF
Underlying Supplement.
Historical Performance of the Basket Components
The following graphs
and tables sets forth the historical performances of the Basket Components based on the daily historical Official Closing Prices
from November 15, 2007 through November 15, 2012. We obtained the Official Closing Prices below from the Bloomberg Professional
®
service. We have not made any independent investigation as to the accuracy or completeness of the information obtained from the
Bloomberg Professional
®
service.
The historical
prices of a Basket Component should not be taken as an indication of its future performance, and no assurance can be given as to
the Official Closing Price of any Basket Component on the Final Valuation Date. We cannot give you assurance that the performance
of the Basket will result in the return of any of your initial investment.
Historical Performance
of the EWZ
Quarter Begin
|
Quarter End
|
Quarterly High
|
Quarterly Low
|
Quarterly Close
|
10/1/2007
|
12/31/2007
|
$86.28
|
$69.89
|
$79.86
|
1/2/2008
|
3/31/2008
|
$87.85
|
$63.33
|
$76.23
|
4/1/2008
|
6/30/2008
|
$101.14
|
$76.67
|
$88.66
|
7/1/2008
|
9/30/2008
|
$88.04
|
$48.15
|
$55.98
|
10/1/2008
|
12/31/2008
|
$56.04
|
$26.36
|
$34.75
|
1/2/2009
|
3/31/2009
|
$40.86
|
$31.02
|
$37.51
|
4/1/2009
|
6/30/2009
|
$58.38
|
$37.08
|
$52.75
|
7/1/2009
|
9/30/2009
|
$68.21
|
$47.83
|
$67.39
|
10/1/2009
|
12/31/2009
|
$80.58
|
$64.81
|
$74.41
|
1/4/2010
|
3/30/2010
|
$78.08
|
$60.69
|
$73.46
|
4/1/2010
|
6/30/2010
|
$75.88
|
$57.05
|
$61.79
|
7/1/2010
|
9/30/2010
|
$76.90
|
$60.73
|
$76.72
|
10/1/2010
|
12/31/2010
|
$81.53
|
$73.00
|
$77.40
|
1/3/2011
|
3/31/2011
|
$78.98
|
$70.10
|
$77.48
|
4/1/2011
|
6/30/2011
|
$80.18
|
$69.04
|
$73.35
|
7/1/2011
|
9/30/2011
|
$74.65
|
$51.65
|
$52.04
|
10/3/2011
|
12/30/2011
|
$64.53
|
$49.25
|
$57.39
|
1/3/2012
|
3/30/2012
|
$70.74
|
$58.41
|
$64.74
|
4/2/2012
|
6/30/2012
|
$65.77
|
$48.28
|
$51.80
|
7/1/2012
|
9/28/2012
|
$58.07
|
$49.49
|
$54.05
|
10/1/2012
|
11/15/2012*
|
$55.48
|
$50.84
|
$51.24
|
* As of the date of this
pricing supplement, available information for the fourth calendar quarter of 2012 includes data for the period from October 1,
2012 through November 15, 2012. Accordingly, the “Quarterly High,” “Quarterly Low” and “Quarterly
Close” data indicated are for this shortened period only and do not reflect complete data for the fourth calendar quarter
of 2012.
Historical Performance
of the EWW
Quarter Begin
|
Quarter End
|
Quarterly High
|
Quarterly Low
|
Quarterly Close
|
10/1/2007
|
12/31/2007
|
$64.15
|
$52.91
|
$55.98
|
1/2/2008
|
3/31/2008
|
$59.68
|
$47.51
|
$59.08
|
4/1/2008
|
6/30/2008
|
$63.30
|
$56.21
|
$56.92
|
7/1/2008
|
9/30/2008
|
$56.29
|
$43.10
|
$46.66
|
10/1/2008
|
12/31/2008
|
$46.81
|
$23.24
|
$32.26
|
1/2/2009
|
3/31/2009
|
$35.15
|
$21.52
|
$27.09
|
4/1/2009
|
6/30/2009
|
$37.97
|
$26.88
|
$36.85
|
7/1/2009
|
9/30/2009
|
$45.91
|
$34.03
|
$43.67
|
10/1/2009
|
12/31/2009
|
$51.66
|
$41.55
|
$48.85
|
1/4/2010
|
3/30/2010
|
$53.54
|
$44.71
|
$53.35
|
4/1/2010
|
6/30/2010
|
$58.98
|
$45.19
|
$47.88
|
7/1/2010
|
9/30/2010
|
$53.66
|
$46.55
|
$52.97
|
10/1/2010
|
12/31/2010
|
$62.03
|
$53.35
|
$61.92
|
1/3/2011
|
3/31/2011
|
$63.46
|
$58.04
|
$62.85
|
4/1/2011
|
6/30/2011
|
$64.64
|
$58.77
|
$62.56
|
7/1/2011
|
9/30/2011
|
$63.56
|
$46.80
|
$48.96
|
10/3/2011
|
12/30/2011
|
$57.85
|
$46.65
|
$53.76
|
1/3/2012
|
3/30/2012
|
$62.75
|
$53.94
|
$62.52
|
4/2/2012
|
6/30/2012
|
$63.75
|
$53.49
|
$61.45
|
7/1/2012
|
9/28/2012
|
$66.39
|
$60.19
|
$65.39
|
10/1/2012
|
11/15/2012*
|
$69.00
|
$63.15
|
$63.43
|
* As of the date of this pricing supplement,
available information for the fourth calendar quarter of 2012 includes data for the period from October 1, 2012 through November
15, 2012. Accordingly, the “Quarterly High,” “Quarterly Low” and “Quarterly Close” data indicated
are for this shortened period only and do not reflect complete data for the fourth calendar quarter of 2012.
Events of Default
and Acceleration
If the Notes have
become immediately due and payable following an event of default (as defined in the accompanying prospectus) with respect to the
Notes, the Calculation Agent will determine the accelerated Payment at Maturity due and payable in the same general manner as described
in “Key Terms” in this pricing supplement. In that case, the scheduled trading day preceding the date of acceleration
will be used as the Final Valuation Date for purposes of determining the accelerated Basket Return (including the Final Basket
Level). If a Market Disruption Event exists with respect to a Basket Component on that scheduled trading day, then the accelerated
Final Valuation Date will be postponed for up to three scheduled trading days (in the same manner used for postponing the originally
scheduled Final Valuation Date). The accelerated Maturity Date will be the third business day following the postponed accelerated
Final Valuation Date. For the avoidance of doubt, if no market disruption event exists with respect to a Basket Component on the
scheduled trading day preceding the date of acceleration, the determination of that Basket Component’s Final Price will be
made on that date, irrespective of the existence of a market disruption event with respect to the other Basket Component occurring
on that date.
If the Notes have
become immediately due and payable following an event of default, you will not be entitled to any additional payments with respect
to the Notes. For more information, see “Description of Debt Securities — Senior Debt Securities — Events of
Default” in the accompanying prospectus.