Credit Suisse Group AG, an international banking giant, today agreed to pay a $196 million fine and admitted to violating U.S. securities regulations to settle a case under which they are being investigated by the Securities and Exchange Commission (SEC). They were charged with providing the means for U.S. clients to conduct cross-border purchases and sale of stocks and other securities and advising U.S. clients on these and other investments without first registering with the SEC, as is required by federal regulations.
For about 6 years, advisors for Credit Suisse, working outside of the United States, had been acquiring clients, providing advice to these clients across international borders, and making transactions for them without registering these activities with the SEC. In the end, the accounts numbered over eight thousand and the value under their management exceeded $5.6 billion in total assets. According to the order provided by the SEC, the firm’s profits on this activity totaled more than $82 million.
More significant than the fines, however, is the requirement that the firm admit to wrongdoing as a condition of coming to a settlement. In the policy adopted last year under the SEC’s new chairwoman, Mary Jo White, admissions of guilt in cases of gross misconduct and shameless violations will be an unavoidable contingency of any offered settlement.
The admission of wrongdoing extracted from Credit Suisse was the fifth since June of 2013. SEC Chair Mary Jo White then modified the regulator’s practice, a tradition for many decades, of allowing defendants to settle cases without admitting or denying any violation of federal securities law. A stronger SEC now mandates admissions in a much wider array of circumstances.
Andrew J. Ceresney, director of the SEC’s enforcement division, said, in effect, that registration of broker-dealer and advisor entities are core protections for the investing public and Credit Suisse confessed as part of this settlement that it failed to comply with these requirements for over five years. In addition to Credit Suisse admitting their guilt, they will also pay a fine and comply with other orders from the SEC.
At a recent conference sponsored by the Practising Law Institute in Washington, SEC Chair White explained that, “Admissions are important because they achieve a greater measure of public accountability.” She continued, emphasizing how accountability bolsters public confidence in the credibility of law enforcement agencies and their strength to ensure safe financial markets. She said that this new policy would be invoked when the admission of unlawful conduct can send this “particularly important message to the markets.”
In its first case calling for admissions, in which the hedge fund Harbinger Capital Partners agreed to admit wrongdoing and pay over $18 million in fines for manipulating markets and unfair investor redemption practices, the SEC overturned its own preliminary settlement, confusing some observers.
The SEC followed with a successful prosecuted, high profile case when it forced JP Morgan Chase to admit violating federal securities regulations and to pay a $200 million fine. The case helped quiet some critical of the regulatory body’s ability to exercise the strength of their mandate when push came to shove with Wall Street titans.
After their admission of guilt and payment of a justified fine, Credit Suisse said in a statement that it was pleased to settle, and is working on resolution of a separate US Department of Justice investigation into tax-related matters.
By Brian Ryer