Credit Suisse in $196M settlement with SEC over unregistered advisory services

Firm provided cross-border advisory, brokerage services for 8,500 U.S. clients; admits to wrongdoing

Feb 21, 2014 @ 12:13 pm

By Mason Braswell

The Securities and Exchange Commission ordered Credit Suisse Group AG to pay $196 million as part of a settlement over unregistered brokers who illegally provided advice to U.S. clients.

Credit Suisse financial advisers based outside the United States had been soliciting clients and providing cross-border advice and making transactions for thousands of U.S. clients without registering with the SEC, the commission said.

The alleged offenses began in 2002 and continued into last year, over which time Credit Suisse amassed as many as 8,500 client accounts that contained a total of about $5.6 billion in assets, according to an SEC order.

The firm made more than $82 million from such activities, according to the order.

“The broker-dealer and investment adviser registration provisions are core protections for investors,” said Andrew J. Ceresney, director of the SEC's Division of Enforcement. “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.”

As part of the settlement, Credit Suisse admitted the facts of the SEC's order, acknowledged that its conduct violated the federal securities laws, accepted a censure and a cease-and-desist order, and agreed to retain an independent consultant.

The brokerage firm was ordered to repay the more than $82 million that its unregistered brokers earned in fees and commissions in addition to interest of $64 million and a civil penalty of $50 million.

Credit Suisse currently has approximately 350 financial advisers licensed with Credit Suisse Securities, the firm's U.S. brokerage division.

The SEC said that it wasn't until the high-profile investigations of Swiss-based UBS AG that Credit Suisse began to take steps in 2008 to exit its cross-border advisory business, and the firm had cross-border accounts as recently as last year.

“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,” said Scott W. Friestad, an associate director in the SEC's Division of Enforcement. “Credit Suisse failed to effectively implement internal controls designed to keep its employees from crossing the line and being noncompliant with the federal securities laws.”

Credit Suisse said in a statement that the firm was pleased to have resolved the issue.

A spokesman for the firm, Calvin Mitchell, declined to comment further.

An investigation by the Justice Department over related charges is still pending.

The timing and outcome of those allegations remained uncertain, the firm said in a statement.

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