SEC Fines Credit Suisse $196 Million for Unregistered Cross-Border Brokerage Services

The SEC has announced formal charges against Credit Suisse for the violation of US Federal Securities laws through the illegal

SECThe Securities and Exchange Commission (SEC) has announced formal charges against Credit Suisse Group AG for the violation of US Federal Securities laws through the illegal providing of cross-border brokerage and services to unregistered US clients, according to an SEC statement.

Credit Suisse Latest Firm to Have Brush with Regulators over Unregistered US Clients

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Zurich-based Credit Suisse Group AG is a multinational financial services holding company specializing in virtually all asset classes and financial products, including securities, swaps, foreign exchange and private banking. With respect to brushes with US regulators, this is hardly the first occurrence of a multinational firm doing business with clients without prior regulatory approval in the United States. For its violations, Credit Suisse has agreed to pay a total fine of $196 million, admitting full wrongdoing in its settlement of SEC charges.

csAccording to the SEC’s official order and administrative statement, “Credit Suisse provided cross-border securities services to thousands of U.S. clients and collected fees totaling approximately $82 million without adhering to the registration provisions of the federal securities laws. Credit Suisse relationship managers traveled to the U.S. to solicit clients, provide investment advice, and induce securities transactions. These relationship managers were not registered to provide brokerage or advisory services, nor were they affiliated with a registered entity. The relationship managers also communicated with clients in the U.S. through overseas e-mails and phone calls.”

Illegal Cross-Border Brokerage Services Provided Since 2002

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Indeed, Credit Suisse had been accused of providing illegal cross-border advisory and brokerage services to clients in the US since 2002. The collective net worth of its litany of unregistered client accounts totaled nearly $5.6 billion in assets. According to Andrew J. Ceresney, Director of the SEC’s Division of Enforcement, in a recent statement, “The broker-dealer and investment adviser registration provisions are core protections for investors. As Credit Suisse admitted as part of the settlement, its employees for many years failed to comply with these requirements, and the firm took far too long to achieve compliance.”

Furthermore, it was insinuated that Credit Suisse was fully conscious of its mandatory registration shortcomings, even taking such steps to prevent federal violations – unfortunately for the firm, these methods were not successful, characterized by an ongoing suspicion and consequent charging by the SEC over a period of several years. Ultimately, a parallel investigation launched against fellow Swiss bank UBS for cross-broker financial services back in 2008 was the impetus for the more recent Credit Suisse efforts to limit unregistered US client services, however efforts proved too slow to avoid SEC litigation.

SEC Charges Credit Suisse Was Fully Aware of Its Actions

“As a multinational firm with a significant U.S. presence, Credit Suisse was well aware of the steps that a firm needs to take to legally conduct advisory or brokerage business with U.S. clients. Credit Suisse failed to effectively implement internal controls designed to keep its employees from crossing the line and being non-compliant with the federal securities laws,” added Scott W. Friestad, Associate Director in the SEC’s Division of Enforcement.

courtroomCredit Suisse has agreed to pay $82,170,990 million in disgorgement, a further $64,340,024 in prejudgment interest, and an additional $50 million penalty ($196 million total) for its violations of Section 15(a) of the SEC Securities Exchange Act of 1934 and Section 203(a) of the Investment Advisers Act of 1940. Forex Magnates’ reporters reached out to Credit Suisse but were unable to reach a company spokesperson for additional comments.

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