Filed Pursuant to Rule 433
Registration No. 333-223208
November 8, 2019
FREE WRITING PROSPECTUS
(To Prospectus dated February 26, 2018,
Prospectus Supplement dated February 26,
2018 and
Stock-Linked Underlying Supplement dated
February 26, 2018)
Linked to the Class B Common Stock of United
Parcel Service, Inc. (the “Reference Asset”)
► | 3.00x exposure to any positive return of the Reference Asset, subject to a maximum return of 21.50% |
► | 1-for-1 exposure to any loss in the Reference Asset beyond the Initial Value, with a potential loss of 100% of principal |
► | Approximately a 1 year maturity |
► | All payments on the Notes are subject to the credit risk of HSBC USA Inc. |
The Accelerated Market Participation SecuritiesTM
(each a “Note” and collectively the “Notes") offered hereunder will not be listed on any securities
exchange or automated quotation system. The Notes will not bear interest.
Neither the U.S. Securities and Exchange Commission
(the “SEC”) nor any state securities commission has approved or disapproved of the Notes or passed upon the accuracy
or the adequacy of this document, the accompanying prospectus, prospectus supplement or Stock-Linked Underlying Supplement. Any
representation to the contrary is a criminal offense. We have appointed HSBC Securities (USA) Inc., an affiliate of ours, as the
agent for the sale of the Notes. HSBC Securities (USA) Inc. will purchase the Notes from us for distribution to other registered
broker-dealers or will offer the Notes directly to investors. In addition, HSBC Securities (USA) Inc. or another of its affiliates
or agents may use the pricing supplement to which this free writing prospectus relates in market-making transactions in any Notes
after their initial sale. Unless we or our agent inform you otherwise in the confirmation of sale, the pricing supplement to which
this free writing prospectus relates is being used in a market-making transaction. See “Supplemental Plan of Distribution
(Conflicts of Interest)” on page FWP-12 of this document.
Investment in the Notes involves certain risks.
You should refer to “Risk Factors” beginning on page FWP-7 of this document, page S-1 of the accompanying prospectus
supplement and page S-1 of the accompanying Stock-Linked Underlying Supplement.
The Estimated Initial Value of the Notes on the Pricing
Date is expected to be between $950.00 and $980.00 per Note, which will be less than the price to public. The market value of the
Notes at any time will reflect many factors and cannot be predicted with accuracy. See “Estimated Initial Value” on
page FWP-4 and “Risk Factors” beginning on page FWP-7 of this document for additional information.
|
Price to Public |
Underwriting Discount(1) |
Proceeds to Issuer |
Per Note |
$1,000/ |
|
|
Total |
|
|
|
(1) HSBC USA Inc. or one of our affiliates
may pay varying underwriting discounts of up to 1.25% per $1,000 Principal Amount in connection with the distribution of the Notes
to other registered broker-dealers. See “Supplemental Plan of Distribution (Conflicts of Interest)” on page FWP-12
of this document
The Notes:
Are Not FDIC Insured |
Are Not Bank Guaranteed |
May Lose Value |
Indicative Terms1
Principal Amount |
$1,000 per Note |
Term |
Approximately 1 year |
Reference Asset |
The Class B common stock of United Parcel Service, Inc. (Ticker: UPS) |
Upside Participation Rate |
300% (3.00x) exposure to any positive Reference Return |
Maximum Cap |
21.50%. |
Reference Return |
Final Value – Initial Value
Initial Value |
Payment at
Maturity per Note |
If the Reference Return is greater than zero, the lesser
of:
a) $1,000 + ($1,000 × Reference Return × Upside
Participation Rate); and
b) $1,000 + ($1,000 × Maximum Cap).
If the Reference Return is equal to zero:
$1,000 per
$1,000 Principal Amount ( a zero return).
If the Reference Return is less than zero:
$1,000 + ($1,000 × Reference Return)
For example, if the Reference Return is -30%, you will suffer
a 30% loss and receive 70% of the Principal Amount, subject to the credit risk of HSBC USA, Inc. If the Reference Return is less
than the Initial Value, you will up to 100.00% of your investment. |
Initial Value |
The Official Closing Price of the Reference Asset on the Pricing Date |
Final Value |
The Official Closing Price of the Reference Asset on the Final Valuation Date |
Pricing Date |
November 13, 2019 |
Trade Date |
November 13, 2019 |
Original Issue Date |
November 18, 2019 |
Final Valuation Date(2) |
November 16, 2020 |
Maturity Date(2) |
November 19, 2020 |
CUSIP/ISIN |
40435UK78/US40435UK783 |
(1)As more fully described
on page FWP-4.
(2) Subject to adjustment
as described under "Additional Terms of the Notes" in the accompanying Stock-Linked Underlying Supplement.
The Notes
The
Notes are designed for investors who believe the Reference Asset will appreciate over the term of the Notes and provide
an opportunity for accelerated returns (subject to the Maximum Cap).
If the Reference Asset
appreciates over the term of the Notes, you will realize a Payment at Maturity equal to 300% (3.00x) of the Reference Asset appreciation,
subject to a Maximum Cap of 21.50%. Should the Reference Asset decline, you will lose 1% of your investment for every 1% decline
in the Reference Asset beyond the Initial Value, with a potential loss of 100% of your investment.
Payoff Example |
|
|
|
|
|
The table at right shows the hypothetical payout profile of an investment in the Notes reflecting the Upside Participation Rate of 300% (3.00x), and reflecting the Maximum Cap of 21.50%. |
|
|
Information about the Reference Asset |
|
United Parcel Service,
Inc. delivers packages and documents throughout the United States and in other countries and territories. The company also provides
global supply chain services and less-than-truckload transportation, primarily in the U.S. The company's business consists of integrated
air and ground pick-up and delivery network. The Class B common stock of United Parcel Service, Inc. trades on the New York Stock
Excahnge under the symbol “UPS.”
|
|
|
The graph above illustrates the performance of the Reference
Asset from November 1, 2009 through November 6, 2019. The closing values in the graph above were obtained from the Bloomberg Professional®
Service. Past performance is not necessarily an indication of future results. For further information on the Reference Asset, please
see “Description of the Reference Asset” beginning on page FWP-13 of this document. We have derived all disclosure
regarding the Reference Asset from publicly available information. Neither HSBC USA Inc. nor any of its affiliates have undertaken
any independent review of, or made any due diligence inquiry with respect to, the publicly available information about the Reference
Asset.
HSBC USA Inc. |
|
Accelerated Market Participation Securities |
Linked to the Class B common stock of United Parcel Service,
Inc.
This document relates to
a single offering of Accelerated Market Participation Securities. The Notes will have the terms described in this document and
the accompanying prospectus, prospectus supplement and Stock-Linked Underlying Supplement. If the terms of the Notes offered hereby
are inconsistent with those described in the accompanying prospectus, prospectus supplement or Stock-Linked Underlying Supplement,
the terms described in this document shall control.
This document relates
to an offering of Notes linked to the performance of the Class B common stock of United Parcel Service, Inc. (the “Reference
Asset”). The purchaser of a Note will acquire a senior unsecured debt security of HSBC USA Inc. linked to the Reference Asset
as described below. The following key terms relate to the offering of Notes:
Issuer: |
HSBC USA Inc. |
Principal Amount: |
$1,000 per Note |
Reference Asset: |
The Class B common stock of United Parcel Service, Inc. (Ticker: UPS) |
Trade Date: |
November 13, 2019 |
Pricing Date: |
November 13, 2019 |
Original Issue Date: |
November 18, 2019 |
Final Valuation Date: |
November 16, 2020, is subject to adjustment as described under “Additional Terms of the Notes—Valuation Dates” in the accompanying Stock-Linked Underlying Supplement. |
Maturity Date: |
3 business days after the Final Valuation Date, which is expected to be November 19, 2020. The Maturity Date is subject to adjustment as described under “Additional Terms of the Notes—Coupon Payment Dates, Call Payment Dates and Maturity Date” in the accompanying Stock-Linked Underlying Supplement. |
Upside Participation Rate: |
300% (3.00x) |
Maximum Cap: |
21.50%. |
Payment at Maturity: |
On the Maturity Date, for each Note, we will pay you the Final Settlement Value. |
Reference Return: |
The quotient, expressed as a percentage, calculated as follows: |
|
Final Value – Initial Value
Initial Value |
Final Settlement Value: |
If the Reference Return is greater than zero, you
will receive a cash payment on the Maturity Date, per $1,000 Principal Amount, equal to the lesser of:
(a) $1,000 + ($1,000 × Reference Return × Upside
Participation Rate); and
(b) $1,000 + ($1,000 × Maximum Cap).
If the Reference Return is equal to zero, you
will receive $1,000 per $1,000 Principal Amount (a zero return).
If the Reference Return is less than zero, you
will receive a cash payment on the Maturity Date, per $1,000 Principal Amount, calculated as follows:
$1,000 + ($1,000 × Reference Return)
Under these circumstances, you will lose 1% of the
Principal Amount of your Notes for each percentage point that the Reference Return is below zero. For example, if the Reference
Return is -30%, you will suffer a 30% loss and receive 70% of the Principal Amount, subject to the credit risk of HSBC. If
the Reference Return is less than 0%, you will lose up to 100% of your investment. |
Initial Value: |
The Official Closing Price of the Reference Asset on the Pricing Date. |
Final Value: |
The Official Closing Price of the Reference Asset on the Final Valuation Date. |
Form of Notes: |
Book-Entry |
Listing: |
The Notes will not be listed on any U.S. securities exchange or quotation system. |
CUSIP/ISIN: |
40435UK78/US40435UK783 |
Estimated Initial Value: |
The Estimated Initial Value of the Notes will be less than the price you pay to purchase the Notes. The Estimated Initial Value does not represent a minimum price at which we or any of our affiliates would be willing to purchase your Notes in the secondary market, if any, at any time. The Estimated Initial Value will be calculated on the Pricing Date and will be set forth in the pricing supplement to which this free writing prospectus relates. See “Risk Factors — The Estimated Initial Value of the Notes, which will be determined by us on the Pricing Date, will be less than the price to public and may differ from the market value of the Notes in the secondary market, if any.” |
The Trade Date, the Pricing
Date and the other dates set forth above are subject to change, and will be set forth in the pricing supplement relating to the
Notes.
GENERAL
This document relates to an offering of Notes linked to the
Reference Asset. The purchaser of a Note will acquire a senior unsecured debt security of HSBC USA Inc. We reserve the right to
withdraw, cancel or modify this offering and to reject orders in whole or in part. Although the offering of Notes relates to the
Reference Asset, you should not construe that fact as a recommendation as to the merits of acquiring an investment linked to the
Reference Asset or as to the suitability of an investment in the Notes.
You should read this document together
with the prospectus dated February 26, 2018, the prospectus supplement dated February 26, 2018 and the Stock-Linked Underlying
Supplement dated February 26, 2018. If the terms of the Notes offered hereby are inconsistent with those described in the accompanying
prospectus, prospectus supplement or Stock-Linked Underlying Supplement, the terms described in this document shall control. You
should carefully consider, among other things, the matters set forth in “Risk Factors” beginning on page FWP-7 of this
document, page S-1 of the prospectus supplement and page S-1 of the Stock-Linked Underlying 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, prospectus supplement and Stock-Linked Underlying Supplement) with the SEC for the offering to which this
document relates. Before you invest, you should read the prospectus, prospectus supplement and Stock-Linked 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 Stock-Linked Underlying Supplement if you request them by calling toll-free 1-866-811-8049.
You may also obtain:
We are using this free writing prospectus
to solicit from you an offer to purchase the Notes. You may revoke your offer to purchase the Notes at any time prior to the time
at which we accept your offer by notifying HSBC Securities (USA) Inc. We reserve the right to change the terms of, or reject any
offer to purchase, the Notes prior to their issuance. In the event of any material changes to the terms of the Notes, we will notify
you.
PAYMENT AT
MATURITY
On the Maturity Date, for each Note you
hold, we will pay you the Final Settlement Value, which is an amount in cash, as described below:
If the Reference Return is greater than
zero, you will receive a cash payment on the Maturity Date, per $1,000 Principal Amount, equal to the lesser of:
(a) $1,000
+ ($1,000 × Reference Return × Upside Participation Rate); and
(b) $1,000
+ ($1,000 × Maximum Cap).
If the Reference Return is equal to zero, you will receive
$1,000 per $1,000 Principal Amount (a zero return).
If the Reference Return is less than
the Buffer Percentage, you will receive a cash payment on the Maturity Date, per $1,000 Principal Amount, calculated as follows:
$1,000 + ($1,000 ×
(Reference Return).
Under these circumstances, you will lose
1% of the Principal Amount of your Notes for each percentage point that the Reference Return is below the Buffer Percentage. For
example, if the Reference Return is -30%, you will suffer a 30% loss and receive 70% of the Principal Amount, subject to the credit
risk of HSBC. If the Reference Return is less than the Buffer Percentage, you will lose up to 100% of your investment.
Interest
The Notes will not pay interest.
Calculation Agent
We or one of our affiliates will act as
calculation agent with respect to the Notes.
INVESTOR SUITABILITY
The Notes may be suitable for you if:
| 4 | You seek an investment with an enhanced return linked to the potential positive performance of
the Reference Asset and you believe the value of the Reference Asset will increase over the term of the Notes. |
| 4 | You are willing to invest in the Notes based on the Maximum Cap of 21.50%, which may limit your
return at maturity. |
| 4 | You are willing to make an investment that is exposed to the negative Reference Return on a 1-to-1
basis for each percentage point that the Reference Return is below 0.00%, with a potential loss of 100% of your investment. |
| 4 | You are willing to forgo dividends or other distributions paid to holders of the Reference Asset. |
| 4 | You are willing to accept the risk and return profile of the Notes versus a conventional debt security
with a comparable maturity issued by HSBC or another issuer with a similar credit rating. |
| 4 | You do not seek current income from your investment. |
| 4 | You do not seek an investment for which there is an active secondary market. |
| 4 | You are willing to hold the Notes to maturity. |
| 4 | You are comfortable with the creditworthiness of HSBC, as Issuer of the Notes. |
The Notes
may not be suitable for you if:
| 4 | You believe the Reference Return will be negative or that the Reference Return will not be sufficiently
positive to provide you with your desired return. |
| 4 | You are unwilling to invest in the Notes based on the Maximum Cap of 21.50%, which may limit your
return at maturity. |
| 4 | You are unwilling to make an investment that is exposed to the negative Reference Return on a 1-to-1
basis for each percentage point that the Reference Return is below 0.00%, with a potential loss of 100% of your investment. |
| 4 | You seek an investment that provides full return of principal. |
| 4 | You prefer the lower risk, and therefore accept the potentially lower returns, of conventional
debt securities with comparable maturities issued by HSBC or another issuer with a similar credit rating. |
| 4 | You prefer to receive the dividends or other distributions paid to holders of the Reference Asset. |
| 4 | You seek current income from your investment. |
| 4 | You seek an investment for which there will be an active secondary market. |
| 4 | You are unable or unwilling to hold the Notes to maturity. |
| 4 | You are not willing or are unable to assume the credit risk associated with HSBC, as Issuer of the
Notes. |
RISK FACTORS
We urge you to read the section “Risk
Factors” beginning on page S-1 of the accompanying prospectus supplement and page S-1 of the accompanying Stock-Linked
Underlying Supplement. You should understand the risks of investing in the Notes and should reach an investment decision only after
careful consideration, with your advisors, of the suitability of the Notes in light of your particular financial circumstances
and the information set forth in this document and the accompanying, prospectus, prospectus supplement and Stock-Linked Underlying
Supplement.
In addition to the risks discussed below,
you should review “Risk Factors” in the accompanying prospectus supplement and Stock-Linked Underlying Supplement including
the explanation of risks relating to the Notes described in the following sections:
| 4 | “— Risks Relating to All Note Issuances” in the prospectus supplement; and |
| 4 | “— General Risks Related to Reference Stocks” in the Stock-Linked Underlying
Supplement. |
You will be subject to significant risks
not associated with conventional fixed-rate or floating-rate debt securities.
Your investment in the Notes may result
in a loss.
You will be exposed to the decline in the
Final Value from the Initial Value. Accordingly, if the Reference Return is less than 0.00%, your Payment at Maturity will be less
than the Principal Amount of your Notes. You will lose some or a significant portion (up to 100.00%) of your investment at maturity
if the Reference Return is less than 0.00%.
The appreciation on the Notes is limited
by the Maximum Cap.
You will not participate in any appreciation
in the value of the Reference Asset (as multiplied by the Upside Participation Rate) beyond the Maximum Cap of 21.50%. You will
not receive a return on the Notes greater than the Maximum Cap.
The amount payable on the Notes is not
linked to the value of the Reference Asset at any time other than on the Final Valuation Date.
The Final Value will be based on the Official
Closing Price of the Reference Asset on the Final Valuation Date, subject to postponement for non-trading days and certain market
disruption events. Even if the value of the Reference Asset appreciates during the term of the Notes other than on the Final Valuation
Date but then decreases on the Final Valuation Date to a value that is less than the Initial Value, the Payment at Maturity may
be less, and may be significantly less, than it would have been had the Payment at Maturity been linked to the value of the Reference
Asset prior to such decrease. Although the actual value of the Reference Asset on the Maturity Date or at other times during the
term of the Notes may be higher than the Final Value, the Payment at Maturity will be based solely on the Official Closing Price
of the Reference Asset on the Final Valuation Date.
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.
The Notes will not bear interest.
As a holder of the Notes, you will not
receive interest payments.
The Notes are not insured or guaranteed
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 or guaranteed 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 due on the
Notes.
The Estimated Initial Value of the Notes,
which will be determined by us on the Pricing Date, will be less than the price to public and may differ from the market value
of the Notes in the secondary market, if any.
The Estimated Initial Value of the Notes
will be calculated by us on the Pricing Date and will be less than the price to public. The Estimated Initial Value will reflect
our internal funding rate, which is the borrowing rate we pay to issue market-linked securities, as well as the mid-market value
of the embedded derivatives in the Notes. This internal funding rate is typically lower than the rate we would
use when we issue conventional fixed or
floating rate debt securities. As a result of the difference between our internal funding rate and the rate we would use when we
issue conventional fixed or floating rate debt securities, the Estimated Initial Value of the Notes may be lower if it were based
on the prices at which our fixed or floating rate debt securities trade in the secondary market. In addition, if we were to use
the rate we use for our conventional fixed or floating rate debt issuances, we would expect the economic terms of the Notes to
be more favorable to you. We will determine the value of the embedded derivatives in the Notes by reference to our or our affiliates’
internal pricing models. These pricing models consider certain assumptions and variables, which can include volatility and interest
rates. Different pricing models and assumptions could provide valuations for the Notes that are different from our Estimated Initial
Value. These pricing models rely in part on certain forecasts about future events, which may prove to be incorrect. The Estimated
Initial Value does not represent a minimum price at which we or any of our affiliates would be willing to purchase your Notes in
the secondary market (if any exists) at any time.
The price of your Notes in the secondary
market, if any, immediately after the Pricing Date will be less than the price to public.
The price to public takes into account
certain costs. These costs, which will be used or retained by us or one of our affiliates, include the underwriting discount, our
affiliates’ projected hedging profits (which may or may not be realized) for assuming risks inherent in hedging our obligations
under the Notes and the costs associated with structuring and hedging our obligations under the Notes. If you were to sell your
Notes in the secondary market, if any, the price you would receive for your Notes may be less than the price you paid for them
because secondary market prices will not take into account these costs. The price of your Notes in the secondary market, if any,
at any time after issuance will vary based on many factors, including the value of the Reference Asset and changes in market conditions,
and cannot be predicted with accuracy. The Notes are not designed to be short-term trading instruments, and you should, therefore,
be able and willing to hold the Notes to maturity. Any sale of the Notes prior to maturity could result in a loss to you.
If we were to repurchase your Notes
immediately after the Original Issue Date, the price you receive may be higher than the Estimated Initial Value of the Notes.
Assuming that all relevant factors remain
constant after the Original Issue Date, the price at which HSBC Securities (USA) Inc. may initially buy or sell the Notes in the
secondary market, if any, and the value that may initially be used for customer account statements, if any, may exceed the Estimated
Initial Value on the Pricing Date for a temporary period expected to be approximately 3 months after the Original Issue Date. This
temporary price difference may exist because, in our discretion, we may elect to effectively reimburse to investors a portion of
the estimated cost of hedging our obligations under the Notes and other costs in connection with the Notes that we will no longer
expect to incur over the term of the Notes. We will make such discretionary election and determine this temporary reimbursement
period on the basis of a number of factors, including the tenor of the Notes and any agreement we may have with the distributors
of the Notes. The amount of our estimated costs which we effectively reimburse to investors in this way may not be allocated ratably
throughout the reimbursement period, and we may discontinue such reimbursement at any time or revise the duration of the reimbursement
period after the Original Issue Date of the Notes based on changes in market conditions and other factors that cannot be predicted.
The Notes lack liquidity.
The Notes will not be listed on any securities
exchange. HSBC Securities (USA) Inc. is not required to offer to purchase the Notes in the secondary market, if any exists. Even
if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the Notes easily. 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.
Potential conflicts of interest may
exist.
An affiliate of HSBC has a minority equity
interest in the owner of an electronic platform, through which we may make available certain structured investments offering materials.
HSBC and its affiliates play a variety of roles in connection with the issuance of the Notes, including acting as calculation agent
and hedging our obligations under the Notes. In performing these duties, the economic interests of the calculation agent and other
affiliates of ours are potentially adverse to your interests as an investor in the Notes. We will not have any obligation to consider
your interests as a holder of the Notes in taking any action that might affect the value of your Notes.
Uncertain tax treatment.
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”
herein and the discussion under “U.S. Federal Income Tax Considerations” in the accompanying prospectus supplement.
ILLUSTRATIVE
EXAMPLES
The following table and examples are provided
for illustrative purposes only and are hypothetical. They do not purport to be representative of every possible scenario concerning
increases or decreases in the value of the Reference Asset relative to its Initial Value. We cannot predict the Final Value. The
assumptions we have made in connection with the illustrations set forth below may not reflect actual events, and the hypothetical
Initial Value used in the table and examples below is not expected to be the actual Initial Value of the Reference Asset. You should
not take this illustration or these examples as an indication or assurance of the expected performance of the Reference Asset or
the return on your Notes. The Final Settlement Value may be less than the amount that you would have received from a conventional
debt security with the same stated maturity, including such a security issued by HSBC. The numbers appearing in the table below
and following examples have been rounded for ease of analysis.
The table below illustrates the Payment
at Maturity on a $1,000 investment in the Notes for a hypothetical range of Reference Returns from -100% to +100%. The following
results are based solely on the assumptions outlined below. The “Hypothetical Return on the Notes” as used below is
the number, expressed as a percentage, that results from comparing the Final Settlement Value per $1,000 Principal Amount to $1,000.
The potential returns described here assume that your Notes are held to maturity. You should consider carefully whether the Notes
are suitable to your investment goals. The following table and examples assume the following:
4 |
Principal Amount: |
$1,000 |
4 |
Hypothetical Initial Value: |
$100.00 |
4 |
Upside Participation Rate: |
300% |
4 |
Maximum Cap: |
21.50% |
The actual Initial Value will be determined
on the Pricing Date.
Hypothetical
Final Value |
Hypothetical
Reference Return |
Hypothetical
Payment at Maturity |
Hypothetical
Return on the Notes |
$200.00 |
100.00% |
$1,215.00 |
21.50% |
$180.00 |
80.00% |
$1,215.00 |
21.50% |
$160.00 |
60.00% |
$1,215.00 |
21.50% |
$140.00 |
40.00% |
$1,215.00 |
21.50% |
$130.00 |
30.00% |
$1,215.00 |
21.50% |
$120.00 |
20.00% |
$1,215.00 |
21.50% |
$115.00 |
15.00% |
$1,215.00 |
21.50% |
$107.17 |
7.17% |
$1,215.00 |
21.50% |
$105.00 |
5.00% |
$1,150.00 |
15.00% |
$102.00 |
2.00% |
$1,060.00 |
6.00% |
$101.00 |
1.00% |
$1,030.00 |
3.00% |
$100.00 |
0.00% |
$1,000.00 |
0.00% |
$99.00 |
-1.00% |
$990.00 |
-1.00% |
$98.00 |
-2.00% |
$980.00 |
-2.00% |
$95.00 |
-5.00% |
$950.00 |
-5.00% |
$93.00 |
-7.00% |
$930.00 |
-7.00% |
$92.00 |
-8.00% |
$920.00 |
-8.00% |
$90.00 |
-10.00% |
$900.00 |
-10.00% |
$80.00 |
-20.00% |
$800.00 |
-20.00% |
$70.00 |
-30.00% |
$700.00 |
-30.00% |
$60.00 |
-40.00% |
$600.00 |
-40.00% |
$20.00 |
-80.00% |
$200.00 |
-80.00% |
$0.00 |
-100.00% |
$0.00 |
-100.00% |
The following examples indicate how the
Final Settlement Value would be calculated with respect to a hypothetical $1,000 investment in the Notes.
Example 1: The value of the Reference
Asset increases from the Initial Value of $100.00 to a Final Value of $105.00.
|
|
Reference Return: |
5.00% |
Final Settlement Value: |
$1,150.00 |
Because the Reference Return is positive,
and the Reference Return multiplied by the Upside Participation Rate is less than the Maximum Cap, the Final Settlement Value would
be $1,150.00 per $1,000 Principal Amount, calculated as follows:
$1,000 + ($1,000 ×
Reference Return × Upside Participation Rate)
= $1,000 + ($1,000
× 5.00% ×300%)
= $1,150.00
Example 1 shows that you will receive the
return of your principal investment plus a return equal to the Reference Return multiplied by the Upside Participation Rate when
the Reference Asset appreciates and such Reference Return multiplied by the Upside Participation Rate does not exceed the
Maximum Cap.
Example 2: The value of the Reference
Asset increases from the Initial Value of $100.00 to a Final Value of $120.00.
|
|
Reference Return: |
20.00% |
Final Settlement Value: |
$1,215.00 |
Because the Reference Return is positive,
and the Reference Return multiplied by the Upside Participation Rate is greater than the Maximum Cap, the Final Settlement Value
would be $1,215.00 per $1,000 Principal Amount, calculated as follows:
$1,000 + ($1,000 ×
Maximum Cap)
= $1,000 + ($1,000
× 21.50%)
= $1,215.00
Example 2 shows that you will receive the
return of your principal investment plus a return equal to the Maximum Cap when the Reference Return is positive and such Reference
Return multiplied by the Upside Participation Rate exceeds the Maximum Cap.
Example 3: The value of the Reference
Asset decreases from the Initial Value of $100.00 to a Final Value of $70.00
|
|
Reference Return: |
-30.00% |
Final Settlement Value: |
$700.00 |
Because the Reference Return is less than zero, the Final Settlement
Value would be $700.00 per $1,000 Principal Amount, calculated as follows:
$1,000 + [$1,000 × Reference Return)]
= $1,000 + [$1,000 × -30.00%]
= $700.00
Example 4 shows that you are exposed on a 1-to-1 basis to declines
in the level of the Reference Asset beyond 0.00%. You will lose up to 100% of your investment.
DESCRIPTION OF THE REFERENCE ASSET |
United Parcel Service, Inc. delivers packages
and documents throughout the United States and in other countries and territories. The company also provides global supply chain
services and less-than-truckload transportation, primarily in the U.S. The company's business consists of integrated air and ground
pick-up and delivery network. The Class B common stock of United Parcel Service, Inc. trades on the New York Stock Excahnge under
the symbol “UPS.”
|
Historical Performance of the Reference
Asset
The following graph sets forth the historical
performance of the Reference Asset based on the daily historical closing values from November 1, 2009 through November 6, 2019.
We obtained the closing values below from the Bloomberg Professional® service. We have not undertaken any independent
review of, or made any due diligence inquiry with respect to, the information obtained from the Bloomberg Professional®
service.
|
The historical levels of the Reference Asset should not be taken as an indication of future performance, and no assurance can be given as to the Official Closing Price of the Reference Asset on the Final Valuation Date.
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 due and payable in the same general manner as described in this document, except that
in such a case, the scheduled trading day immediately preceding the date of acceleration will be used as the Final Valuation Date
for purposes of determining the Reference Return, and the accelerated maturity date will be three business days after the accelerated
Final Valuation Date. If a Market Disruption Event exists with respect to the Reference Asset on that scheduled trading day,
then the accelerated Final Valuation Date for the Reference Asset will be postponed for up to five scheduled trading days (in the
same manner used for postponing the originally scheduled Final Valuation Date). The accelerated maturity date will also be
postponed by an equal number of business days.
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.
SUPPLEMENTAL
PLAN OF DISTRIBUTION (CONFLICTS OF INTEREST)
We have appointed HSBC Securities (USA) Inc., an affiliate of
HSBC, as the agent for the sale of the Notes. Pursuant to the terms of a distribution agreement, HSBC Securities (USA) Inc.
will purchase the Notes from HSBC at the price to public less the underwriting discount set forth on the cover page of the pricing
supplement to which this free writing prospectus relates, for distribution to other registered broker-dealers, or will offer the
Notes directly to investors. HSBC Securities (USA) Inc. proposes to offer the Notes at the price to public set forth on the
cover page of this document. HSBC USA Inc. or one of our affiliates may pay varying underwriting discounts of up to 1.25%
per $1,000 Principal Amount in connection with the distribution of the Notes to other registered broker-dealers.
An affiliate of HSBC has paid or may pay in the future an amount
to broker-dealers in connection with the costs of the continuing implementation of systems to support the Notes.
In addition, HSBC Securities (USA) Inc. or another of its affiliates
or agents may use the pricing supplement to which this free writing prospectus relates in market-making transactions after the
initial sale of the Notes, but is under no obligation to make a market in the Notes and may discontinue any market-making activities
at any time without notice.
See “Supplemental Plan of Distribution (Conflicts of Interest)”
on page S-61 in the prospectus supplement.
We expect that delivery of the Notes will be made against payment
for the Notes on or about the Original Issue Date set forth on the inside cover page of this document, which is more than two business
days following the Trade Date. Under Rule 15c6-1 under the
Securities Exchange Act of 1934, trades in the secondary market
generally are required to settle in two business days, unless the parties to that trade expressly agree otherwise. Accordingly,
purchasers who wish to trade the Notes more than two business days prior to the Original Issue Date will be required to specify
an alternate settlement cycle at the time of any such trade to prevent a failed settlement, and should consult their own advisors.
U.S. FEDERAL
INCOME TAX CONSIDERATIONS
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 Reference Asset. 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, Mayer Brown LLP, it is reasonable to treat a Note as a pre-paid executory contract with respect to
the Reference Asset. Pursuant to this approach, 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.
We will not attempt to ascertain
whether the Reference Asset 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. If the Reference Asset
were so treated, certain adverse U.S. federal income tax consequences might apply. You should refer to information filed with the
SEC and other authorities by the Reference Asset and consult your tax advisor regarding the possible consequences to you if the
Reference Asset is or becomes a PFIC or a USRPHC
Under current law, while the
matter is not entirely clear, individual non-U.S. holders, and entities whose property is potentially includible in those individuals’
gross estates for U.S. federal estate tax purposes (for example, a trust funded by such an individual and with respect to which
the individual has retained certain interests or powers), should note that, absent an applicable treaty benefit, the Notes are
likely to be treated as U.S. situs property, subject to U.S. federal estate tax. These individuals and entities should consult
their own tax advisors regarding the U.S. federal estate tax consequences of investing in the Notes.
A “dividend equivalent”
payment is treated as a dividend from sources within the United States and such payments generally would be subject to a 30% U.S.
withholding tax if paid to a non-U.S. holder. Under U.S. Treasury Department regulations, payments (including deemed payments)
with respect to equity-linked instruments (“ELIs”) that are “specified ELIs” may be treated as dividend
equivalents if such specified ELIs reference an interest in an “underlying security,” which is generally any interest
in an entity taxable as a corporation for U.S. federal income tax purposes if a payment with respect to such interest could give
rise to a U.S. source dividend. However, Internal Revenue Service guidance provides that withholding on dividend equivalent payments
will not apply to specified ELIs that are not delta-one instruments and that are issued before January 1, 2021. Based on the Issuer’s
determination that the Notes are not “delta-one” instruments, non-U.S. holders should not be subject to withholding
on dividend equivalent payments, if any, under the Notes. However, it is possible that the Notes could be treated as deemed reissued
for U.S. federal income tax purposes upon the occurrence of certain events affecting the Reference Asset or the Notes, and following
such occurrence the Notes could be treated as subject to withholding on dividend equivalent payments. Non-U.S. holders that enter,
or have entered, into other transactions in respect of the Reference Asset or the Notes should consult their tax advisors as to
the application of the dividend equivalent withholding tax in the context of the Notes and their other transactions. If any payments
are treated as dividend equivalents subject to withholding, we (or the applicable paying agent) would be entitled to withhold taxes
without being required to pay any additional amounts with respect to amounts so withheld.
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.
PROSPECTIVE PURCHASERS OF NOTES
SHOULD CONSULT THEIR TAX ADVISORS AS TO THE FEDERAL, STATE, LOCAL, AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP
AND DISPOSITION OF NOTES.
TABLE OF CONTENTS |
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|
You should only
rely on the information contained in this free writing prospectus, the accompanying Stock-Linked Underlying Supplement, prospectus
supplement and prospectus. We have not authorized anyone to provide you with information or to make any representation to you that
is not contained in this free writing prospectus, the accompanying Stock-Linked Underlying Supplement, prospectus supplement and
prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. This free writing prospectus,
the accompanying Stock-Linked Underlying Supplement, prospectus supplement and prospectus are not an offer to sell these Notes,
and these documents are not soliciting an offer to buy these Notes, in any jurisdiction where the offer or sale is not permitted.
You should not, under any circumstances, assume that the information in this free writing prospectus, the accompanying Stock-Linked
Underlying Supplement, prospectus supplement and prospectus is correct on any date after their respective dates.
HSBC USA Inc.
$ Accelerated
Market Participation
Securities Linked to the
Class B Common
Stock of United
Parcel Service, Inc.
November 8, 2019
Free Writing Prospectus |
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|
|
Free Writing Prospectus |
|
|
General |
FWP-5 |
|
Payment at Maturity |
FWP-5 |
|
Investor Suitability |
FWP-6 |
|
Risk Factors |
FWP-7 |
|
Illustrative Examples |
FWP-10 |
|
Description of the Reference Asset |
FWP-12 |
|
Events of Default and Acceleration |
FWP-12 |
|
Supplemental Plan of Distribution (Conflicts of Interest) |
FWP-12 |
|
U.S. Federal Income Tax Considerations |
FWP-13 |
|
Stock-Linked Underlying Supplement |
|
|
Risk Factors |
S-1 |
|
Additional Terms of the Notes |
S-7 |
|
Information Regarding the Reference Stocks and the |
|
|
Reference Stock Issuers |
S-13 |
|
|
|
|
Prospectus Supplement |
|
|
|
|
|
Risk Factors |
S-1 |
|
Pricing Supplement |
S-10 |
|
Description of Notes |
S-12 |
|
Use of Proceeds and Hedging |
S-36 |
|
Certain ERISA Considerations |
S-37 |
|
U.S. Federal Income Tax Considerations |
S-39 |
|
Supplemental Plan of Distribution (Conflicts of Interest) |
S-61 |
|
|
|
|
Prospectus |
|
|
About this Prospectus |
1 |
|
Risk Factors |
2 |
|
Where You Can Find More Information |
3 |
|
Special Note Regarding Forward-Looking Statements |
4 |
|
HSBC USA Inc. |
7 |
|
Use of Proceeds |
8 |
|
Description of Debt Securities |
9 |
|
Description of Preferred Stock |
20 |
|
Description of Warrants |
25 |
|
Description of Purchase Contracts |
30 |
|
Description of Units |
33 |
|
Book-Entry Procedures |
36 |
|
Limitations on Issuances in Bearer Form |
40 |
|
U.S. Federal Income Tax Considerations Relating to Debt Securities |
41 |
|
Plan of Distribution (Conflicts of Interest) |
49 |
|
Notice to Canadian Investors |
52 |
|
Notice to EEA Investors |
53 |
|
Notice to UK Investors |
54 |
|
UK Financial Promotion |
54 |
|
Certain ERISA Matters |
55 |
|
Legal Opinions |
57 |
|
Experts |
58 |
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This regulatory filing also includes additional resources:
tm1921860-10_fwp.pdf