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From Banking and Finance Law Daily, November 17, 2014

Will Credit Suisse get sanctions waived? Hearing scheduled for January

By Colleen M. Svelnis, J.D.

The Department of Labor (DOL) has scheduled a hearing on Jan. 15, 2015 to determine whether affiliates of Credit Suisse should be permitted to serve as “qualified professional asset manager” after Credit Suisse’s guilty plea to one count of conspiracy to engage in tax fraud. The hearing will be held at the DOL’s headquarters in Washington, DC.

Background. The DOL is proposing to waive sanctions imposed on Credit Suisse based on the bank’s guilty plea for conspiring to aid taxpayers evade taxes. In May 2014, Credit Suisse became the first major bank to plead guilty to a criminal offense. The bank will pay a total of $1.8 billion in the form of a fine of over $1.13 billion and nearly $670 million in restitution to the Internal Revenue Service. Such criminal misconduct automatically disqualifies Credit Suisse and its affiliates from claiming the status of a “qualified professional asset manager,” prohibiting it from providing certain asset management services to pension funds (see Banking and Finance Law Daily, Oct. 14, 2014).

Congressional response. Maxine Waters (D-Calif), Ranking Member of the Financial Services Committee, released a statement in response to the news, saying “This is an important step forward to ensure the Department of Labor is truly not just a ‘rubber stamp’ in granting these waivers. An open and transparent hearing will provide an opportunity to hear the views of advocates, interest groups and citizens in a manner that is more in-depth than a comment process. In the future, I hope that other regulatory agencies can follow DOL’s lead, and provide the same level of public transparency when dealing with similar matters.”

Exemption possible. According to a DOL release, when faced with similar situations in the past, the department has granted exemptions that stipulated and included rigorous requirements designed to protect individuals covered by retirement plans. The release notes that, without an exemption, Credit Suisse’s affiliates could also be restricted from engaging in many commercial transactions on behalf of private pension plans and Individual Retirement Accounts.

The DOL also announced a temporary exemption, with conditions, to allow retirement plans to continue to do business with Credit Suisse's affiliates as qualified professional asset managers. The DOL says that these conditions are designed to protect plan assets and individuals while the department considers testimony from the hearing. The conditions include:

  • the development of extensive policies and procedures designed to ensure that the affiliates fully comply with their fiduciary duties, stringent reporting requirements, mandatory training of Credit Suisse personnel regarding their legal and ethical responsibilities;

  • an independent audit of the Credit Suisse affiliates’ compliance with their fiduciary obligations and the terms of the exemption; and

  • Credit Suisse must notify affected plans and IRAs of the criminal conviction and its consequences.

The DOL has also announced a new notice for a proposed exemption that would take into account the feedback and comments already received. The DOL stated that testimony submitted during the hearing will be included as public comments on the new proposal.

The DOL will determine whether to issue a final exemption after reviewing testimony from the hearing and other public comments.

Companies: Credit Suisse Bank

MainStory: TopStory BankingOperations CrimesOffenses EnforcementActions FinancialStability

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