Three entities of Swiss bank Credit Suisse agreed to pay more than $10 million combined as part of a settlement with the Securities and Exchange Commission (SEC) for allegedly providing prohibited underwriting and advising services to mutual funds.
Credit Suisse Securities was assessed a civil penalty of $1 million, while two of its asset management affiliates were separately fined $2 million and $300,000. The asset managers also agreed to pay nearly $6.8 million in disgorgement and prejudgment interest, the SEC announced in a press release Wednesday.
The details: In October 2022, a New Jersey court ruled on a 2013 case alleging Credit Suisse Securities violated the antifraud provisions of state laws in connection with its role as underwriter to residential mortgage-backed securities. The court prohibited Credit Suisse Securities and its affiliates from serving as principal underwriter or investment adviser to mutual funds and employees’ securities.
The SEC found the Credit Suisse entities defied the order and continued to serve in these roles until receiving a time-limited exemption from the agency days before UBS completed its acquisition of Credit Suisse in June.
Compliance considerations: The Credit Suisse entities did not follow the New Jersey order based on their assumption the order did not trigger the disqualification provisions of Section 9(a) of the Investment Company Act, according to the SEC’s order. Though the asset management affiliates were not directly subject to the consent order, its restrictions applied to them as “affiliated persons” as defined by the act.
The Credit Suisse entities, now part of UBS, received a permanent exemption from Section 9(a) of the act in July.
Firm response: “Following the identification and notification of this matter to the SEC, this settlement marks another important step in our efforts to proactively resolve Credit Suisse litigation and legacy matters,” said a UBS spokesperson in an emailed statement.
The Credit Suisse entities neither admitted nor denied the SEC’s findings.