Credit Suisse Securities has been fined $9 million by the Financial Industry Regulatory Authority (FINRA) for failing to comply with securities rules designed to protect investors.
Specifically, Credit Suisse Securities violated the Securities and Exchange Commission’s Customer Protection Rule and FINRA rules requiring firms to disclose potential conflicts of interest when issuing research reports.
“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,” Jessica Hopper, head of FINRA’s Department of Enforcement, said. “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.”
As part of the settlement, FINRA required Credit Suisse to certify that it has implemented supervisory systems and procedures to comply with the Customer Protection Rule and other requirements.
Credit Suisse violated the Customer Protection Rule in two ways, according to FINRA. One, it failed to maintain possession or control of billions of dollars of fully paid and excess margin securities it carried for customers. Two, it failed to accurately calculate its required customer reserve, which is the amount of cash or securities the firm was required to maintain in a special reserve bank account.
Also, FINRA found Credit Suisse issued more than 20,000 research reports that contained inaccurate disclosures about potential conflicts of interest between 2006 and 2017. Further, FINRA found that the firm issued more than 6,000 research reports that omitted required disclosures. Finally, Credit Suisse failed to preserve more than 18.6 billion records in a non-erasable and non-writable format, as required, FINRA officials said.
Credit Suisse accepted and consented to the entry of FINRA’s findings without admitting or denying them.