* FY pretax $18.87 bln vs f'cast $21.8 bln, $858 mln Q4 loss
* Says under SEC investigation over Asia recruitment
* Raises annual dividend to $0.51 per share from $0.50
* CEO Gulliver pay lowered to 7.34 mln stg from 7.62 mln
* Shares in London down 2.6 percent (Adds details on deferred prosecution agreement, share price)
By Lisa Jucca and Lawrence White
HONG KONG/LONDON, Feb 22 (Reuters) - HSBC revealed it faces another potentially damaging U.S.investigation, this time over hiring people linked to governmentofficials in Asia, which combined with below-forecast earningshit its shares on Monday.
Europe's biggest lender, which also said a U.S. monitor hadconcerns over the speed with which it was changing followingmoney laundering lapses, confirmed it is among several financialfirms being probed by the Securities and Exchange Commission(SEC) over Asian recruitment practices.
The SEC opened an investigation into JPMorgan in2013 over the hiring of "princelings", the term used in Asia torefer to the children or younger relatives of China's politicalleaders or top executives at state-owned enterprises.
HSBC did not comment on the likely timing or impact of theprobe into its own conduct, which combined with other regulatoryrevelations spooked some in the market given the billions it andother banks have had to pay to settle other U.S. cases.
The London-based bank disclosed that an independent monitorassigned under the terms of a 2012 deferred prosecutionagreement (DPA) with U.S. regulators over money-launderinglapses had expressed 'significant concerns' over the pace ofprogress in improving internal controls.
The monitor reports annually on the bank's progress inimproving its anti-money laundering and sanctions compliance aspart of a five-year agreement HSBC signed following a fine of$1.9 billion over charges it had been used to launder cash.
Any decision as to whether the bank has breached the termsof the DPA rests with the U.S. Department of Justice.
If found to have breached the agreement, HSBC could face anextension of the monitoring period, or even criminal prosecutionresulting in further financial penalties, the bank said in itsannual report.
Meanwhile, the bank also said India's tax authority nowbelieves it has evidence to prosecute HSBC for allegedlyabetting tax evasion, in a case first disclosed a year ago.
HSBC posted profit before tax of $18.87 billion for 2015,little changed on 2014 but well below an average analysts'estimate of $21.8 billion, according to Thomson Reuters data,dragged down by a $858 million fourth quarter loss.
The regulatory moves and muted results meant HSBC was thebiggest-declining stock in the blue-chip FTSE 100 index,falling as much as 4 percent at one point, although the sharesregained some ground and closed down 0.9 percent.
HSBC said it would stick to delivering on a June strategicplan centred around expanding in China, in particular thedensely-populated Pearl River Delta region, despite an economicslowdown there making the environment more challenging.
"China's slower economic growth will undoubtedly contributeto a bumpier financial environment, but it is still expected tobe the largest contributor to global growth," Chairman DouglasFlint said.
BREXIT IMPACT
HSBC, which just over a week ago decided not to move itsheadquarters to Hong Kong, said it would raise its total annualdividend to $0.51 per share from $0.50, a relief to investorswho had worried the lender's more constrained capital positionwould cause it to abandon its goal of dividend growth.
The bank also warned that while it is keeping itsheadquarters in London, the possibility of Britain leaving theEuropean Union could cause major disruptions to its business.
"A disorderly exit could force changes to HSBC's operatingmodel, affect our ability to access the European Central Bankand high-value euro payments, and affect our transaction volumesdue to possible disruption to global trade flows," it cautionedin its annual report.
So-called 'Brexit' would not trigger another HQ review,Gulliver said, but could lead to around 1,000 trading divisionjobs moving to continental Europe, likely Paris.
"The best possible outcome is for the UK to stay," Gulliversaid on a media call following the results.
The bank said its poor fourth-quarter results reflectedvalue adjustments on derivatives, legal costs and the disposalof its Brazilian business. It was also hit by restructuringcosts the bank is undertaking to achieve cost savings of between$4.5 billion and $5 billion.
HSBC said it would retain and restructure Turkish operationsthat had been up for sale, after offers it received were deemednot to be in the best interest of shareholders.
"It remains a very good bank with a conservative riskappetite and will continue to outperform peers in a bear market,but as we've seen today, the earnings outlook for the bankremains muted," analysts at Bernstein Research wrote in a note.
Last year, Asia represented 83.5 percent of global pre-taxprofit for HSBC, a larger portion than a year earlier and a signthe bank's growth is tied to the region's.
HSBC said in its annual report Chief Executive StuartGulliver's total pay had fallen to 7.34 million pounds ($10.33million) from 7.62 million a year earlier. ($1 = 0.7107 pounds) (Additional reporting by Denny Thomas in Hong Kong and RachelArmstrong and Richa Naidu in London; Editing by David Holmes andAlexander Smith)
HSBC Holdings (HSBA)