Credit Suisse Securities agreed to pay a $9 million fine for failing to comply with securities laws and rules involving potential conflicts of interest and the safeguarding of customer securities, the Financial Industry Regulatory Authority (FINRA) announced Thursday.
As part of a consent order, Credit Suisse accepted a censure and neither admitted nor denied FINRA’s findings.
From 2011 through November 2019, Credit Suisse twice violated the Securities and Exchange Commission’s Customer Protection Rule, according to FINRA.
“First, the firm failed to maintain possession or control of billions of dollars of fully paid and excess margin securities it carried for customers, as required,” FINRA explained in an enforcement notice. “Second, on numerous occasions, the firm failed to accurately calculate its required customer reserve—that is, the amount of cash or securities the firm was required to maintain in a special reserve bank account.”
Credit Suisse must certify it has implemented systems and procedures designed to comply with the Customer Protection Rule as part of its agreement with FINRA.
In a second violation, FINRA found Credit Suisse, from 1997 through 2020, failed to maintain approximately 18.6 billion electronic brokerage records in non-erasable and non-writable (WORM) format, which is “intended to prevent the alteration of or distribution of records stored electronically.”
Thirdly, from 2006 through 2017, Credit Suisse publicly issued more than 20,000 research reports that “contained inaccurate disclosures regarding its investment banking relationships,” which constituted potential conflicts of interest, FINRA said.
FINRA also found the firm issued more than 6,000 research reports that omitted required disclosures, including that “the subject of the research report had been a client of the firm during the prior 12 months” or that “the firm expected to receive investment banking compensation from the subject company within the next three months.”
Credit Suisse said in a statement it is “pleased to have settled this matter. The bank has fully cooperated with FINRA and has remediated the underlying issues, which primarily concern coding errors in Credit Suisse systems.”
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