FINRA handed down a $9 million fine to Credit Suisse Securities Thursday for allegedly failing to sufficiently safeguard their customers assets, disclose conflicts of interest and other record-keeping violations dating back as early as 1997.
Photo Credit: Shutterstock
The New York firm failed to keep 18.6 billion records in the required “WORM” format and disclose potential conflicts of interest in research reports, both direct violations of the U.S. Securities and Exchange Commission’s customer protection rule.
“This case should serve as a reminder to member firms of their obligation to protect customer funds from improper use, and to ensure accurate disclosures of potential conflicts between research subjects and firms in research reports, both of which are critically important for investor protection,” said Jessica Hopper, head of FINRA’s enforcement department, in an announcement on behalf of the agency.
The SEC’s rule strictly prohibits firms from using clients’ securities improperly to fund its own business endeavors. This is prevented through a “segregation requirement” that the firm retains a certain amount of customers’ securities in its physical “possession or control,” and other reserve accounts that must maintain minimum cash balances.
According to the settlement, between 2011 and 2019, Credit Suisse breached the rule by failing to maintain control of billions of dollars of securities it held in segregated accounts for customers due to “coding and manual errors,” and they also incorrectly calculated the minimum cash balances needed as reserves.
From 2006 through 2017, Credit Suisse also issued approximately 20,000 research reports containing inaccurate disclosures about potential conflicts of interest, including omissions that companies analyzed in the reports had been firm clients within the prior year.
The settlement also states that between 1997 and 2020, Credit Suisse failed to preserve more than 18.6 billion records in a non-erasable and non-writable format, known as WORM or “write once, read many.”
“The obligation to maintain records in WORM format is intended to prevent the alteration or destruction of records stored electronically and exists in part so that FINRA and other regulators can protect investors through periodic examinations,” according to the deal.
“Credit Suisse is pleased to have settled this matter,” a firm spokesperson stated. “The bank has fully cooperated with FINRA and has remediated the underlying issues, which primarily concern coding errors in Credit Suisse systems.”
As an additive to the $9 million fine and a censure, Suisse must certify within 180 days that it has implemented supervisory systems and procedures that comply with FINRA and SEC regulations.
Read more articles from Haute Lawyer, visit https://hauteliving.com/hautelawyer
Source: https://www.law360.com/articles/1457077
Corporate
January 18, 2022Tesla Investors Request Musk Pay Back $13B From SolarCity Deal
