Global Conglomerate, Credit Suisse Group AG, Fined for SEC Violations

Credit Suisse is one of the most highly regarded financial institutions in the world. In fact, it has been speculated that as a company with such influence, it has the ability to upset the global economy. Yet in recent years, it has been fraught with controversy and now the SEC has fined Credit Suisse $196 million for cross-border transactions which violates the SEC’s registration requirements.

The violation of federal securities laws governing cross-border transactions is not the first SEC infraction committed by Credit Suisse, nor is it the first time that they have been investigated by either the U.S. or foreign countries. In 2006, the company admitted to misconduct by aiding foreign countries in hiding transactions from U.S. authorities, which resulted in Credit Suisse paying a $536 million settlement. Then in 2011, the Department of Justice accused four Credit Suisse bankers of fraud when it determined that these bankers were helping some wealthy U.S. citizens avoid paying taxes.

The Securities Exchange Act of 1934 was created in an effort to regulate U.S. financial markets and the broker-managers who trade in those markets. It was from this legislation that the Securities Exchange Commission was formed. The legislation requires that all companies that are involved in the trading of certain securities in the U.S. to register with the Securities and Exchange Commission. In doing so, each company must provide a description of the company’s properties, business, the type of security it will be offering, management information, and financial statements that have been verified by independent accounts. This information allows investors to make clear choices about the companies that they rely upon for investment purposes; however, there are those companies that try to circumvent the process.

The most recent SEC investigation revealed that, although not registered with the SEC, international financial services company, Credit Suisse Group AG, has been engaging in financial transactions with U.S. customers. These activities include cross-border brokerage and investment advising through the use of relationship managers who entered the U.S. with the express purpose of targeting U.S citizens. These relationship managers provided investment advice and facilitated securities transactions to approximately 8,500 U.S. accounts, even though they were not registered with the SEC nor were they affiliated with any agencies that had fulfilled the registration requirements. These transactions resulted in accounts that contained nearly $5.6 billion in assets and in garnering roughly $82 million in fees for Credit Suisse.

Beginning in 2002, the years-long investigation by the SEC revealed that Credit Suisse was in violation of both the Securities Act of 1934 and the Investment Advisers Act of 1940. Consequently, the SEC has fined the banking giant $196 million. The company has not only conceded to pay the fine, but also admitted to its culpability, agreed to comply with a cease-and-desist order, and to retain an independent consultant to ensure such issues are avoided in the future.

Aware of the federal securities laws mandating registration, Credit Suisse took steps to prevent such violations. Those internal controls, however, were neither properly implemented nor supervised in a manner conducive to preventing such occurrences until long after they began. The SEC’s order states that it was only after a high-profile criminal and civil investigation in 2008 into conduct of the same nature by UBS that Credit Suisse began to try to cease its cross-border services in the U.S.; however, it did not completely abandon these actions until mid-2013.

Andrew J. Ceresney, Director of the SEC’s Division of Enforcement stated, “The broker-dealer and investment advisor registration provisions are core protections for investors. 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.”

If you feel that you have suffered financial losses due to the cross-border trading actions of Credit Suisse, please call us for a free consultation at 1-877-STOCK LAW (877-786-2552).