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From Securities Regulation Daily, February 21, 2014

Credit Suisse agrees to pay $196 million for provision of unregistered services to U.S. clients

By Amy Leisinger, J.D.

The Securities and Exchange Commission today announced it settled charges against Zurich-based Credit Suisse Group AG for violating the U.S. federal securities laws by providing cross-border brokerage and investment advisory services to thousands of U.S. clients without registering with the SEC. Credit Suisse admitted its wrongdoing and, among other things, agreed to pay over $196 million to settle the SEC’s charges (In re Credit Suisse Group AGRelease No. 34-71593, February 21, 2014).

In a press release, Scott W. Friestad, an associate director in the SEC’s Division of Enforcement, said: “[a]s 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.”

Allegations. According to the SEC, unregistered Credit Suisse relationship managers traveled to the U.S. to solicit clients, to provide investment advice, to induce securities transactions and communicated with clients in the U.S. through overseas e-mails and phone calls, conducting unregistered cross-border advisory and brokerage services for U.S. clients as early as 2002. The Commission alleges that Credit Suisse had as many as 8,500 U.S. client accounts with assets under management totaling approximately $5.6 billion and collected approximately $82 million in fees from U.S. clients. The firm was aware of applicable SEC-registration requirements, but its efforts to prevent violations were not effectively implemented or appropriately monitored, the SEC contends. In addition, it was not until investigations into similar conduct by another company began that Credit Suisse initiated steps to get out of the cross-border advisory and brokerage business. And, it took the firm years to completely exit, during which it continued to collect fees on some accounts.

By this conduct, the Commission finds Credit Suisse willfully violated the registration requirements for broker-dealers under Exchange Act Section 15(a) and for investment advisers under Advisers Act Section 203(a).

Sanctions. In settling the SEC’s charges, Credit Suisse admitted the facts in the Commission’s order, acknowledged that its conduct violated the federal securities laws and accepted a censure. The firm agreed to cease and desist from committing or causing any violations of the registration provisions of the federal securities laws and to retain an independent consultant (who will report back to Commission staff) to verify that it has terminated all inappropriate business activities and to evaluate its policies and procedures to ensure they are reasonably capable of preventing future violative  activity. Credit Suisse also agreed to pay $82,170,990 in disgorgement, $64,340,024 in prejudgment interest, and a civil monetary penalty of $50 million.

Companies: Credit Suisse Group AG

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