Credit Suisse will pay almost US$200 million in a settlement with U.S. regulators over allegations that it violated securities laws when its private bankers served U.S. clients without proper registration.
The U.S. Securities and Exchange Commission (SEC) announced that it has settled charges against Credit Suisse Group AG for allegedly violating federal securities laws by providing cross-border brokerage and investment advisory services to U.S. clients without first registering with the SEC. The firm agreed to pay US$196 million in penalties, disgorgement and interest, and to admit wrongdoing, in order to settle the allegations.
According to the SEC’s order, Credit Suisse provided cross-border securities services to thousands of U.S. clients, and collected fees of approximately US$82 million, without adhering to the registration provisions of the federal securities laws. It says that the firm began conducting advisory and brokerage services for U.S. clients as early as 2002, amassing as many as 8,500 client accounts that contained an average total of US$5.6 billion in assets. The SEC notes that Credit Suisse was aware of the registration requirements and took action designed to prevent violations, but that these initiatives largely failed because they were not effectively implemented or monitored.
The commission says that it was only after a much-publicized civil and criminal investigation into similar conduct by Swiss-based UBS that Credit Suisse began to take steps to exit the business of providing cross-border advisory and brokerage services to U.S. clients in October 2008. Still, it took the firm until mid-2013 to completely exit the cross-border business, the SEC says.
In settling the allegations, Credit Suisse admitted the facts in the SEC’s order, acknowledged that it violated federal securities laws, accepted a censure and a cease-and-desist order, and agreed to retain an independent consultant. It also agreed to pay US$82.2 million in disgorgement, US$64.3 million in prejudgment interest, and a US$50 million penalty.
The firm says that the monetary penalty will be covered by the increase in litigation provisions that it took in the fourth quarter of 2013. “We are pleased to have resolved this issue with the SEC,” it said. “The Department of Justice investigation into tax-related issues remains outstanding, and while we continue to work to resolve this matter, the timing and outcome remain uncertain.”