The Financial Industry Regulatory Authority (FINRA) in the US has slapped a $9 million fine on Credit Suisse Securities, a unit of a Swiss banking giant, for multiple violations of regulatory laws and rules that are protecting investors’ interests.
Announced on Thursday, the self-regulatory agency alleged that Credit Suisse issued more than 20,000 research reports between 2006 and 2017 that contained inaccurate disclosures about potential conflicts of interest. Further, the bank published over 6,000 reports omitting some required disclosure.
Moreover, Credit Suisse failed to maintain possession or control of billions of dollars of fully paid and excess margin securities it carried for customers, thus violating customer protection rules, according to FINRA.
The investment bank even failed to accurately calculate its required customer reserve on numerous occasions. It is the amount of cash or securities the company needs to maintain in a special reserve bank account.
Customer Protection Is Crucial
“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,” said Jessica Hopper, the Executive Vice President and Head of FINRA’s Department of Enforcement.
Credit Suisse has already accepted the regulatory orders and consented without admitting or denying any changes. The settlement further requires the company to certify that it has implemented supervisory systems with appropriate customer protections mechanisms.
“This case should serve as a reminder to member firms of their obligation to protect customer funds from improper use, and to ensure accurate disclosure of potential conflicts between research subjects and firms in research reports, both of which are critically important for investor protection,” Hopper added.
