Feb. 21 -- The Securities and Exchange Commission announced Feb. 21 that Zurich-based Credit Suisse Group AG agreed to pay $196 million and to admit wrongdoing, resolving administrative charges it provided cross-border brokerage and investment advisory services to U.S. clients without first registering with the agency (In re Credit Suisse Group AG, SEC, Admin. Proc. File No. 3-15763, 2/21/14).
In a release, the SEC said the investment bank collected approximately $82 million in fees for the challenged services.
Specifically, it alleged, “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.”
“The broker-dealer and investment adviser registration provisions are core protections for investors,” SEC Enforcement Director Andrew J. Ceresney said in the release. “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.”
Allegedly, Credit Suisse began conducting cross-border advisory and brokerage services for U.S. clients as early as 2002. According to the SEC, the firm knew about federal securities law registration requirements and in fact undertook initiatives designed to prevent registration violations. “These initiatives largely failed, however, because they were not effectively implemented or monitored.”
The SEC said that in the wake of an investigation into similar conduct UBS, in 2008, Credit Suisse began taking steps to stop providing cross-border advisory and brokerage services to U.S. clients. “Although the number of U.S. client accounts decreased beginning in 2009 and the majority were closed or transferred by 2010, it took Credit Suisse until mid-2013 to completely exit the cross-border business.”
In settling the allegations, Credit Suisse admitted to the facts alleged by the SEC and acknowledged that its conduct violated the securities laws. It also agreed to be censured, to cease and desist from future violations, and to retain an independent consultant, the SEC recapped. It also agreed to pay $82,170,990 in disgorgement, $64,340,024 in prejudgment interest, and a $50 million penalty.
To see the administrative order, go to http://www.sec.gov/litigation/admin/2014/34-71593.pdf.
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