Unassociated Document
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Filed
Pursuant to Rule 433
Registration
No. 333-158385
May
4, 2009
FREE
WRITING PROSPECTUS
(To
Prospectus dated April 2, 2009,
Prospectus
Supplement dated April 9, 2009,
and
Product Supplement dated April 9, 2009)
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Structured
Investments
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HSBC
USA Inc.
$
[●]
Knock-Out
Buffer Notes Linked to the S&P 500®
Index due November 12, 2010
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General
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·
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Terms
used in this free writing prospectus are described or defined in the
product supplement, prospectus supplement and prospectus. The notes
offered will have the terms described in the product supplement,
prospectus supplement and prospectus. The notes are not principal
protected, and you may lose up to 100.00% of your initial
investment.
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·
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This debt is not guaranteed
under the Federal Deposit Insurance Corporation’s Temporary Liquidity
Guarantee Program.
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All
references to “Enhanced Market Participation Notes” in the product
supplement shall refer to these Knock-Out Buffer
Notes.
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This
free writing prospectus relates to a single note offering. The purchaser
of a note will acquire a security linked to the single reference asset
described below.
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Although
the offering relates to a 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 any component security included in the
reference asset or as to the suitability of an investment in the related
notes.
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Senior
unsecured obligations of HSBC USA Inc. maturing November 12,
2010.
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Minimum
denominations of $1,000 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
product supplement, the terms set forth below will
supersede.
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Key Terms
Reference
Asset:
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The
S&P 500®
Index (“SPX”) (the “reference asset”)
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Knock-Out
Event:
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A
knock-out event occurs if, at any time during the observation period, the
official closing level (as defined below) has decreased, as compared to
the initial level, by more than the knock-out buffer
amount.
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Knock-Out
Buffer Amount:
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30.00%
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Contingent
Minimum Return:
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3.00%
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Principal
Amount:
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$1,000
per note.
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Trade
Date:
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May
8, 2009
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Pricing
Date:
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May
8, 2009
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Original
Issue Date:
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May
13, 2009
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Final
Valuation Date:
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November
9, 2010, subject to adjustment as described herein and in the accompanying
product supplement.
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Observation
Period:
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The
period beginning on and excluding the pricing date and ending on and
including the final valuation date.
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Maturity
Date:
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3
business days after the final valuation date and is expected to be
November 12, 2010. The maturity date is subject to further
adjustment as described under “Market Disruption Events” herein and under
“Specific Terms of the Notes — Market Disruption Events” in the
accompanying product supplement.
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Payment
at Maturity:
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If a
knock-out event has occurred, you will receive a cash payment on
the maturity date that will reflect the performance of the reference
asset. Under these circumstances, your payment at maturity per $1,000
principal amount note will be calculated as follows:
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$1,000
+ ($1,000 x Reference Return)
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If a knock-out event has
occurred and the final level is less than the initial level, you will lose
some or all of your investment. This means that if the
reference 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 reference
asset, subject to the contingent minimum return. If a knock-out event has
not occurred, your payment at maturity per $1,000 principal amount note
will equal $1,000 plus the product of (a) $1,000 multiplied by (b) the
greater of (i) the reference 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 Performance for
the Reference Asset?” herein.
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Reference
Return:
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The
quotient, expressed as a percentage, of (i) the final level minus the
initial level divided by (ii) the initial level, expressed as a
formula:
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Final Level – Initial Level
Initial
Level
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Initial
Level:
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[●], which
represents the official closing level of the reference asset as determined
by the calculation agent on the pricing date.
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Final
Level:
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The
official closing level of the reference asset on the final valuation date,
as determined by the calculation agent.
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Official
Closing Level:
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The
closing level of the reference asset on any scheduled trading day as
determined by the calculation agent and displayed on Bloomberg
Professional®
service page “SPX <Index>”.
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CUSIP/ISIN:
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4042K0WW1 /
[●]
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Form
of Notes:
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Book-Entry
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Listing:
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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” on page
PS-4 of the product supplement and page S-3 of the prospectus
supplement.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of the notes or determined that this free writing
prospectus, or the accompanying product supplement, prospectus supplement and
prospectus, is truthful or complete. Any representation to the
contrary is a criminal offense.
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 of
the United States or any other jurisdiction. We may use this free
writing prospectus in the initial sale of notes. In addition, HSBC
Securities (USA) Inc. or another of our affiliates or agents may use this free
writing prospectus 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 free
writing prospectus is being used in a market-making
transaction.
We have
appointed J.P. Morgan Securities Inc. as placement agent for the sale of the
notes. J.P. Morgan Securities Inc. will offer the notes to investors
directly or through other registered broker-dealers.
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Price
to Public(1)
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Fees
and Commissions
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Proceeds
to Issuer
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Per
Note
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$1,000
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[●]
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[●]
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Total
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[●]
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[●]
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[●]
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(1)
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Certain fiduciary accounts will
pay a purchase price of $[●] per note, and the placement
agents with respect to sales made to such accounts will forgo any
fees.
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JPMorgan
Placement
Agent
May 4, 2009
Additional Terms Specific to the
Notes
This free
writing prospectus relates to a single note offering linked to the reference
asset identified on the cover page. The purchaser of a note will acquire a
security linked to the reference asset. We reserve the right to
withdraw, cancel or modify any offering and to reject orders in whole or in
part. Although the note offering relates only to a single reference asset
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
reference asset or any securities comprising the reference asset or as to the
suitability of an investment in the notes.
You
should read this document together with the prospectus dated April 2, 2009, the
prospectus supplement dated April 9, 2009 and the product supplement dated April
9, 2009. You should carefully consider, among other things, the
matters set forth in “Selected Risk Considerations” beginning on page 5 of this
free writing prospectus and “Risk Factors” on page PS-4 of the product
supplement and page S-3 of the prospectus supplement, as the notes involve risks
not associated with conventional debt securities. All references to “Enhanced
Market Participation Notes” in the product supplement shall refer to these
Knock-Out Buffer Notes. We urge you to consult your investment,
legal, tax, accounting and other advisers before you invest in the
notes. As used herein, references to “HSBC”, “we”, “us” and “our” are
to HSBC USA Inc. (rated A1 by Moody’s Investors Services Limited and AA- by
Standard & Poor’s, a division of The McGraw-Hill Companies,
Inc.)*
HSBC USA
Inc. has filed a registration statement (including a prospectus, a prospectus
supplement and a product supplement) with the U.S. Securities and Exchange
Commission (“SEC”) for the offering to which this free writing prospectus
relates. Before you invest, you should read the prospectus,
prospectus supplement and product supplement in that registration statement and
other documents HSBC USA Inc. has filed with the SEC for more complete
information about HSBC USA Inc. and this offering. You may get these
documents for free by visiting EDGAR on the SEC Web site at
www.sec.gov. Alternatively, HSBC USA Inc. or any dealer participating
in this offering will arrange to send you the prospectus, prospectus supplement
and product supplement if you request them by calling toll-free 1 888 800
4722.
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.
* A credit rating reflects the
creditworthiness of HSBC USA Inc. and is not indicative of the market risk
associated with the notes or the reference asset, nor is it a recommendation to
buy, sell or hold securities, and it may be subject to revision or withdrawal at
any time by the assigning rating organization. The notes themselves
have not been independently rated. Each rating should be evaluated
independently of any other rating. However, because the return on the notes is
dependent upon factors in addition to our ability to pay our obligations under
the notes, such as the official closing level of the reference asset, an
improvement in our credit ratings, financial condition or results of operations
is not expected to have a positive effect on the trading value of the
notes.
What
Is the Total Return on the Notes at Maturity Assuming a Range of Performance for
the Reference Asset?
The
following table illustrates the hypothetical total return at maturity on the
notes. The “total return” as used in this free writing prospectus is the number,
expressed as a percentage, that results from comparing the payment at maturity
per $1,000 principal amount note to $1,000. The hypothetical total returns set
forth below assume an initial level of 900.00, a knock-out buffer amount of
30.00% and a contingent minimum return on the notes of 3.00%. 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.
Final
Level
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Reference
Return
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Total
Return
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Knock
Out Event Has
Not
Occurred(1)
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Knock
Out Event Has
Occurred(2)
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1,620.00
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80.00%
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80.00%
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80.00%
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1,485.00
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65.00%
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65.00%
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65.00%
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1,350.00
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50.00%
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50.00%
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50.00%
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1,260.00
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40.00%
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40.00%
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40.00%
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1,170.00
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30.00%
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30.00%
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30.00%
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1,080.00
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20.00%
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20.00%
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20.00%
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1,035.00
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15.00%
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15.00%
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15.00%
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990.00
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10.00%
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10.00%
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10.00%
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954.00
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6.00%
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6.00%
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6.00%
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945.00
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5.00%
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5.00%
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5.00%
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922.50
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2.50%
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3.00%
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2.50%
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900.00
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0.00%
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3.00%
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0.00%
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855.00
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-5.00%
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3.00%
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-5.00%
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810.00
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-10.00%
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3.00%
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-10.00%
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765.00
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-15.00%
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3.00%
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-15.00%
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720.00
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-20.00%
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3.00%
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-20.00%
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630.00
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-30.00%
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3.00%
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-30.00%
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540.00
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-40.00%
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N/A
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-40.00%
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450.00
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-50.00%
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N/A
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-50.00%
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360.00
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-60.00%
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N/A
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-60.00%
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270.00
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-70.00%
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N/A
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-70.00%
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180.00
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-80.00%
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N/A
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-80.00%
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90.00
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-90.00%
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N/A
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-90.00%
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0.00
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-100.00%
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N/A
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-100.00%
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(1)
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The
official closing level has not declined, as compared to the initial level,
by more than 30.00% at any time during the observation
period.
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(2)
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The official closing level has
declined, as compared to the initial level, by more than 30.00% at any
time during the observation
period.
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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 level of the reference asset increases from the initial level
of 900.00 to a final level of 918.00. Because a knock-out event has not
occurred and the reference return of 2.00% is less than the contingent minimum
return of 3.00%, the investor benefits from the contingent minimum return and
receives a payment at maturity of $1,030.00 per $1,000 principal amount
note.
Example 2: A knock-out event has not
occurred, and the level of the reference asset decreases from the initial level
of 900.00 to a final level of 765.00. Because a knock-out event has not
occurred and the reference return of -15.00% is less than the contingent minimum
return of 3.00%, the investor benefits from the contingent minimum return and
receives a payment at maturity of $1,030.00 per $1,000 principal amount
note.
Example 3: A knock-out event has not
occurred, and the level of the reference asset increases from the initial level
of 900.00 to a final level of 990.00. Because a knock-out event has not
occurred the reference return of 10.00% is greater than the contingent minimum
return of 3.00%, the investor receives a payment at maturity of $1,100.00 per
$1000 principal amount note, calculated as follows:
$1,000 +
($1,000 x 10.00%) = $1,100.00
Example 4: A knock-out event has
occurred, and the level of the reference asset decreases from the initial level
of 900.00 to a final level of 810.00. Because a knock-out event has
occurred, and the reference return is -10.00%, the investor is exposed to the
performance of the reference asset and receives a payment at maturity of $900.00
per $1,000.00 principal amount note, calculated as follows:
$1,000 +
($1,000 x -10.00%) = $900.00
Example 5: A knock-out event has
occurred, and the level of the reference asset increases from the initial level
of 900.00 to a final level of 1,035.00. Because a knock-out event
has occurred and the reference return is 15.00%, the investor receives a payment
at maturity of $1,150.00 per $1,000 principal amount note, calculated as
follows:
$1,000 +
($1,000 x 15.00%) = $1,150.00
Selected Purchase
Considerations
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APPRECIATION POTENTIAL —
The notes provide the opportunity to participate in the appreciation of
the reference asset at maturity. If a
knock-out event has not occurred, in addition to the principal
amount, you will receive at maturity at least the contingent minimum
return of 3.00% on the notes, or a minimum payment at maturity
of $1,030.00 for every $1,000 principal amount note. The actual
contingent minimum return on the notes will be set on the pricing date and
will not be less than 3.00%. Even if a knock-out event has occurred, if
the final level is greater than the initial level, in addition to the
principal amount, you will receive at maturity a return on the notes equal
to the reference return. Because the notes are our senior unsecured
obligations, payment of any amount at maturity is subject to our ability
to pay our obligations as they become
due.
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LIMITED PROTECTION AGAINST
LOSS — If a
knock-out event has occurred, you will lose 1.00% of the principal
amount for every 1% decline of the level of the reference asset during the
observation period. If a knock-out event has occurred and the
reference return is -100.00%, you will lose your entire
investment.
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DIVERSIFICATION OF THE S&P
500® INDEX — The return on
the notes is linked to the S&P 500®
Index. The S&P 500®
Index consists of 500 component stocks selected to provide a performance
benchmark for the U.S. equity markets. For additional information about
the reference asset, see the information set forth under “Description of
the Reference Asset” herein.
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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, the notes should
be treated as pre-paid forward or other executory contracts 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 and, in the opinion of Cadwalader, Wickersham & Taft, our
special counsel, it is reasonable to treat the notes in accordance with
this approach. 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 the U.S. holder has held the note for more
than one year at such time for U.S. federal income tax
purposes. For a further discussion of U.S. federal income tax
consequences related to the notes, see the section “Certain U.S. Federal
Income Tax Considerations” in the accompanying product
supplement.
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Selected Risk
Considerations
An
investment in the notes involves significant risks. Investing in the notes is
not equivalent to investing directly in the reference asset or any of the
component securities of the reference asset. These risks are explained in more
detail in the “Risk Factors” section of the accompanying product
supplement.
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SUITABILITY OF NOTES FOR
INVESTMENT – A person should reach a decision to invest in the
notes after carefully considering, with his or her advisors, the
suitability of the notes in light of his or her investment objectives and
the information set out in this free writing
prospectus. Neither the Issuer 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 reference asset and will depend on whether a knock-out
event has occurred and whether, and the extent to which, the reference
return is positive or negative. If the official closing level has
declined, as compared to the initial level, by more than the knock-out
buffer amount of 30.00% at any time during the observation period, a
knock-out event has occurred, and the protection provided by the knock-out
buffer amount will terminate. IF A KNOCK-OUT EVENT
OCCURS, YOU MAY
LOSE UP TO 100.00% OF YOUR
INVESTMENT.
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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. Any payment to be made on the notes, including any
principal protection 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 PROTECTION MAY TERMINATE
AT ANY TIME DURING THE TERM OF THE NOTES — If the official closing
level at any time during the observation period declines from the initial
level by more than the knock-out buffer amount of 30.00%, you will at
maturity be fully exposed to any decline in the level of the reference
asset. We refer to this feature as a contingent buffer. Under these
circumstances, if the final level is less than the initial level, you will
lose 1% of the principal amount of your investment for every 1% decrease
in the final level as compared to the initial level. You will be subject
to this potential loss of principal even if the level of reference asset
subsequently increases such that the official closing level is less than
the initial level by not more than the knock-out buffer amount of 30.00%,
or is equal to or greater than the initial 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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YOUR ABILITY TO RECEIVE THE
CONTINGENT MINIMUM RETURN MAY TERMINATE AT ANY TIME DURING THE TERM OF THE
NOTES — If the official closing level at any time during the
observation period declines from the initial level by more than the
knock-out buffer amount of 30.00%, you will not be entitled to receive the
protection provided by the contingent minimum return on the notes. Under
these circumstances, you may lose some or all of your investment at
maturity and will be fully exposed to any decline in the level of the
reference asset.
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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 free writing prospectus
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 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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·
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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 securities composing the reference asset would
have.
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·
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LACK OF LIQUIDITY — The
notes will not be listed on any securities exchange. HSBC Securities (USA)
Inc. intends to offer to purchase the notes in the secondary market but is
not required to do so. 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.
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·
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POTENTIAL CONFLICTS — We
and our 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. In
addition, we are currently one of the companies that make up the reference
asset. We will not have any obligation to consider your interests as a
holder of the notes in taking any corporate action that might affect the
level of the reference asset and the value of the
notes.
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·
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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 the Issuer, and in the event that the Issuer
is unable to pay its obligations as they become due, you may not receive
the full payment at maturity of the notes. This debt is not guaranteed
under the Federal Deposit Insurance Corporation’s Temporary Liquidity
Guarantee Program.
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·
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MANY ECONOMIC AND MARKET
FACTORS WILL IMPACT THE VALUE OF THE NOTES — In addition to the
level of the reference asset 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:
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the
expected volatility of the reference
asset;
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the
time to maturity of the notes;
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whether
a knock-out event has occurred;
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·
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the
dividend rate on the equity securities underlying the reference
asset;
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·
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interest
and yield rates in the market
generally;
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·
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a
variety of economic, financial, political, regulatory or judicial events;
and
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our creditworthiness, including
actual or anticipated downgrades in our credit
ratings.
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Description of the Reference
Asset
This
free writing prospectus is not an offer to sell and it is not an offer to buy
interests in any reference asset or any of the securities comprising any
reference asset or any underlying index. All disclosures contained in
this free writing prospectus regarding a reference asset, including its make-up,
performance, method of calculation and changes in its components, where
applicable, are derived from publicly available information. Neither HSBC nor
any of its affiliates assumes any responsibilities for the adequacy or accuracy
of information about any reference asset or any constituent included in any
reference asset contained in this free writing prospectus. You should
make your own investigation into each reference asset.
We urge
you to read the section “Sponsors or Issuers and Reference Asset” on
page S-37 in the accompanying prospectus supplement.
The
S&P 500®
Index
We
have derived all information relating to the reference asset, including, without
limitation, its make-up, performance, method of calculation and changes in its
components, from publicly available sources. That information reflects the
policies of and is subject to change by, Standard & Poor’s, a division of
The McGraw-Hill Companies, Inc. (“S&P”). S&P is under no
obligation to continue to publish, and may discontinue or suspend the
publication of the reference asset at any time.
S&P
publishes the reference asset.
The
reference asset is capitalization weighted and is intended to provide an
indication of the pattern of common stock price movement. The
calculation of the level of the reference asset, discussed below in further
detail, is based on the relative value of the aggregate market value of the
common stocks of 500 companies as of a particular time compared to the aggregate
average market value of the common stocks of 500 similar companies during the
base period of the years 1941 through 1943. As of May 4, 2009, 411
companies, or 82.20% of the reference asset, traded on the New York Stock
Exchange and 89 companies, or 17.80% of the reference asset, traded on The
NASDAQ Stock Market. S&P chooses
companies for inclusion in the reference asset with the aim of achieving a
distribution by broad industry groupings that approximates the distribution of
these groupings in the common stock population of the New York Stock Exchange
(the “NYSE”), which S&P uses as an assumed model for the composition of the
total market.
Relevant
criteria employed by S&P include the viability of the particular company,
the extent to which that company represents the industry group to which it is
assigned, the extent to which the market price of that company’s common stock is
generally responsive to changes in the affairs of the respective industry and
the market value and trading activity of the common stock of that
company. Ten main groups of companies comprise the reference asset
with the number of companies included in each group, as of May 4, 2009,
indicated in parentheses: Industrials (58), Utilities (35), Telecommunication
Services (9), Materials (28), Information Technology (75), Energy (39), Consumer
Staples (41), Consumer Discretionary (81), Health Care (54) and Financials
(80). Changes in the Reference Asset are reported daily in the
financial pages of many major newspapers, on the Bloomberg Professional® service
under the symbol “SPX” and on S&P website
(http://www.spglobal.com). Information contained in the S&P
website is not incorporated by reference in, and should not be considered a part
of, this free writing prospectus. The Reference Asset does not
reflect the payment of dividends on the stocks included in the Reference
Asset.
Computation
of the Reference Asset
S&P
currently computes the reference asset as of a particular time as
follows:
|
(i)
|
the
product of the market price per share and the number of then outstanding
shares of each component stock as determined as of that time (referred to
as the “market value” of that
stock);
|
|
(ii)
|
the
market values of all component stocks as of that time are
aggregated;
|
|
(iii)
|
the
average of the market values as of each week in the base period of the
years 1941 through 1943 of the common stock of each company in a group of
500 substantially similar companies is
determined;
|
|
(iv)
|
the
mean average market values of all these common stocks over the base period
are aggregated (the aggregate amount being referred to as the “base
value”);
|
|
(v)
|
the
current aggregate market value of all component stocks is divided by the
base value; and
|
|
(vi)
|
the
resulting quotient, expressed in decimals, is multiplied by
ten.
|
While
S&P currently employs the above methodology to calculate the reference
asset, no assurance can be given that S&P will not modify or change this
methodology in a manner that may affect the performance of the reference
asset.
S&P
adjusts the foregoing formula to offset the effects of changes in the market
value of a component stock that are determined by S&P to be arbitrary or not
due to true market fluctuations.
These
changes may result from causes such as:
|
·
|
the
issuance of stock dividends,
|
|
·
|
the
granting to shareholders of rights to purchase additional shares of
stock,
|
|
·
|
the
purchase of shares by employees pursuant to employee benefit
plans,
|
|
·
|
consolidations
and acquisitions,
|
|
·
|
the
granting to shareholders of rights to purchase other securities of the
company,
|
|
·
|
the
substitution by S&P of particular component stocks in the reference
asset, and
|
In these
cases, S&P first recalculates the aggregate market value of all component
stocks, after taking account of the new market price per share of the particular
component stock or the new number of outstanding shares of that stock or both,
as the case may be, and then determines the new base value in accordance with
the following formula:
Old Base
Value X New Market
Value = New Base Value
Old
Market Value
The
result is that the base value is adjusted in proportion to any change in the
aggregate market value of all component stocks resulting from the causes
referred to above to the extent necessary to negate the effects of these causes
upon the reference asset.
In
addition, S&P standard practice is to remove all closely held shares and
shares held between corporations who are both in the calculations of the
reference asset and a reference asset component’s market value.
License
Agreement with Standard & Poor’s (“S&P”):
We have
entered into a nonexclusive license agreement providing for the license to us,
in exchange for a fee, of the right to use indices owned and published by
S&P’s in connection with some products, including the
securities.
The notes
are not sponsored, endorsed, sold or promoted by S&P, a division of The
McGraw-Hill Companies, Inc. S&P makes no representation or warranty, express
or implied, to the holders of the notes or any member of the public regarding
the advisability of investing in financial products generally or in the notes
particularly or the ability of the S&P 500® to track
general stock market performance. S&P’s only relationship to HSBC
USA Inc. (other than transactions entered into in the ordinary course of
business) is the licensing of certain service marks and trade names of S&P
and of the S&P 500® which is
determined, composed and calculated by S&P without regard to HSBC
or the notes. S&P has no obligation to take the needs of HSBC or
the holders of the notes into consideration in determining, composing or
calculating the S&P 500®. S&P
is not responsible for and has not participated in the determination of the
timing of the sale of the notes, prices at which the notes are to initially be
sold, or quantities of the notes to be issued or in the determination or
calculation of the equation by which the notes are to be converted into
cash. S&P has no obligation or liability in connection with the
administration, marketing or trading of the notes.
Historical Performance of Reference
Asset
The
following graph sets forth the historical performance of the reference asset
based on the weekly historical closing levels from January 3, 2004 through May
1, 2009. The closing level for the reference asset on May 1, 2009 was
877.52. We obtained the closing levels below from Bloomberg Professional® service.
We make no representation or warranty as to the accuracy or completeness of the
information obtained from 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 closing level on the
final valuation date. We cannot give you assurance that the performance of the
reference asset will result in the return of any of your initial
investment.
Certain ERISA
Considerations
We urge
you to read “Certain ERISA Considerations” in the prospectus
supplement.
An
employee benefit plan subject to the fiduciary responsibility provisions of the
Employee Retirement Income Security Act of 1974 (“ERISA”), a plan that is
subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the
“Code”), including individual retirement accounts, individual retirement
annuities or Keogh plans, a governmental or other plan subject to any
laws, rules or regulations substantially similar to Section 406 of ERISA or
Section 4975 of the Code or any entity the assets of which are deemed to be
“plan assets” for purposes of ERISA, Section 4975 of the Code or otherwise, will
be permitted to purchase, hold and dispose of the notes, subject to certain
conditions. Such investors should carefully review the discussion
under “Certain ERISA Considerations” in the prospectus supplement.
Supplemental Plan of
Distribution
J.P.
Morgan Securities Inc. will act as placement agent for the notes and will
receive a fee from the Issuer that would not exceed $[●] per $1,000 face amount
of notes. See “Supplemental Plan of Distribution” on page S-51 in the
prospectus supplement.