Credit Suisse Fined $9 Million by U.S. Regulator Over Research Report Conflicts

(Bloomberg) -- Credit Suisse Group AG will pay $9 million to settle an industry regulator’s allegations that it violated customer protection rules by not properly accounting for billions of dollars in securities that it carried for clients and also didn’t disclose potential conflicts when publishing research reports.

Credit Suisse’s U.S. securities unit for eight years violated regulations by not maintaining proper control of excess margin securities it held on behalf of customers and for not accurately calculating its reserve account, the Financial Industry Regulatory Authority said in a Thursday statement. Additionally, from 2006 through 2017, the firm issued more than 20,000 reports that contained inaccurate disclosures about potential conflicts, the industry-backed regulator said.

“The Customer Protection Rule is intended to protect customers’ securities by prohibiting firms from using those securities for their own purposes and to ensure the prompt return of customer securities in the event of broker-dealer insolvency,” said Jessica Hopper, executive vice president and head of Finra’s enforcement department. 

Credit Suisse also failed to “establish, maintain and enforce” a supervisory system that complied with federal securities laws and Finra rules, according to the regulator. The bank agreed to the penalty without admitting or denying the allegations.  

“The bank has fully cooperated with Finra and has remediated the underlying issues, which primarily concern coding errors in Credit Suisse systems,” the firm said in a statement. 

The allegations from Finra represent the latest regulatory issue for Credit Suisse, which has been in the crosshairs after a series of personnel and corporate scandals in recent years. The bank was probed by authorities after a spying scandal that ultimately led to the ouster of former Chief Executive Officer Tidjane Thiam and also came under scrutiny more recently over quarantine breaches by ex-Chairman Antonio Horta-Osorio. The lender also attracted regulators’ scrutiny after taking a $5.5 billion hit related to last year’s implosion of Archegos Capital Management and the freezing of supply chain finance funds it ran with Greensill Capital.

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