Another example of the Commission’s new and evolving ad hoc admissions policy emerged from the settlement of an administrative proceeding with Credit Suisse Group AG. In the Matter of Credit Suisse Group AG, File No. 3-15763 (Feb. 21, 2014). To resolve the proceed which, centers on violations of the broker-dealer registration provisions, the firm admitted to factual allegations in the Order as well as to violating the “federal securities laws.” The firm did not admit to violating the specific provisions of the statutes cited in the Order.
Beginning in 2002, and continuing until about 2008, Credit Suisse provided broker-dealer and investment advisory services to a group of U.S. clients from its offices in Switzerland, according to the admitted facts. During that period the firm had as many as 8,500 client account that held securities and were beneficially owned by U.S. residents. The financial institution solicited some of these clients and furnished them with broker-dealer and advisory services. During the period Credit Suisse was not a registered broker dealer or investment adviser. The firm, headquartered in Zurich, Switzerland, did however, have a broker dealer subsidiary, Credit Suisse Securities.
During the period a number of firm employees serviced U.S. based clients from offices located in Switzerland. Some employees were in a dedicated section while others worked in various parts of the financial institution.
To service existing clients, and solicit others, employees traveled periodically to the U.S. During meetings in this country with clients, or potential clients, investment advice was furnished in certain instances. In some meetings securities transaction business was solicited. For example, during one trip a bank employee met with 32 U.S. clients who had assets under management totaling about $129 million. That same employee also visited five prospective U.S. clients. One of those prospects opened an account valued at about $744,000. During another trip a bank employee traveled to New York, Washington, D.C. and Florida. Visits were made to 39 clients with assets under management totaling about $111 million. The bank employee also met with two prospective US. clients who eventually opened accounts with a potential value of approximately $2 million. Other, similar trips took place throughout the period.
Credit Suisse recognized that there were risks of violating the federal securities laws by providing broker-dealer and investment adviser services to U.S. clients. To mitigate this risk beginning in 2002 the bank enacted directives and policies which prohibited its representatives from engaging in improper conduct. Training was provided to certain employees. Audits were conducted in some instances. Those policies and procedures were not effectively implemented. The audits proved ineffective. The violations continued.
In 2008 there was a highly publicized civil and criminal tax investigation of UBS tied to cross-border banking, broker-dealer and investment adviser services. Credit Suisse initiated a process to exit from U.S. cross-border securities business. By 2010 the bank had either transferred or terminated the vast majority of its relationships with U.S. clients. During the period the institution faced conflicting pressures from various employees regarding the decision to withdraw from the U.S. business. In the interim the bank continued to collect fees and manage accounts.
The Order alleges willful violations of Exchange Act Section 15(a) and Advisers Act Section 203(a). To resolve the proceeding Credit Suisse agreed to implement a series of procedures focused on a complete termination of the cross-border business described in the Order. A consultant will be retained to conduct an independent examination and prepare a report which will be made available to the staff. It will assess if the cross-border business described in the Order has fully terminated. The firm also consented to the entry of a censure and a cease and desist order based on the Sections cited in the Order. In addition, Credit Suisse will pay disgorgement of $82,170,990, prejudgment interest and a civil penalty of $50 million.
