Bloomberg News

Credit Suisse Fined $9.5 Million by U.K. FSA on Controls

October 25, 2011

(Updates with analyst comment in fourth paragraph.)

Oct. 25 (Bloomberg) -- Credit Suisse Group AG’s U.K. unit was fined 5.95 million pounds ($9.5 million) for not adequately advising customers regarding the risk of complex financial products.

Credit Suisse had “poor” systems and controls and didn’t maintain its records on advice regarding structured capital at- risk products, or SCARPs, over a three-year period until the end of 2009, the U.K.’s Financial Services Authority said today. The bank failed to ensure staff were giving customers proper advice and didn’t have adequate systems and controls to assess the level of risk their clients wanted to take.

The Zurich-based bank will also reimburse customers who were advised to purchase one of the products when it didn’t match the risk level they were willing to take on investments. Credit Suisse customers in the U.K. invested more than 1 billion pounds in SCARPs, the regulator said.

“The fine is aligned pretty closely with the size of the organization and the FSA will be making sure this wasn’t a profitable exercise,” Oliver Lodge, a former FSA regulator and now a director at Owl Regulatory Consulting, said in a telephone interview.

The fixed-term securities typically provide clients the opportunity for greater returns from the performance of an index or asset. If the price of the underlying asset or index drops below a pre-set point, the client may not get their original funds back.

Client Advice

“We deeply regret the failings of systems and controls in the period 2007-2009 around the provision of advice to U.K. private-banking clients,” Sally Rubery, a spokeswoman for the bank, said in an e-mailed statement. “We have made significant improvements to our processes and controls since 2009 and we are confident that we currently comply with our regulatory obligations.”

Credit Suisse cooperated with the investigation and received the regulator’s standard 30 percent discount on the fine for settling early.

“Significant and widespread failings exist in this area” in the wealth-management industry and “standards need to improve,” said Tracey McDermott, the acting director of enforcement and financial crime at the FSA.

--With assistance from Ben Moshinsky. Editors: Christopher Scinta, Peter Chapman

To contact the reporter on this story: Lindsay Fortado in London at lfortado@bloomberg.net

To contact the editor responsible for this story: Christopher Scinta at cscinta@bloomberg.net


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