Credit Suisse Securities (USA) has agreed to pay $10 million to settle charges from federal and New York state regulators that it misled investors and violated securities laws. The US brokerage arm of the Swiss bank misinformed clients about how it routed orders to other broker-dealers that handle order flow on behalf of retail investors, regulators said on Friday.
The Zurich-based bank’s subsidiary settled that matter without admitting or denying any wrongdoing.
The US regulators’ charges against Credit Suisse revolved around “deficient disclosures” by the bank’s order routers, which are computers that decide where client orders should be sent in order to obtain the best possible Execution .
In settling with both the New York Attorney General and the U.S. Securities and Exchange Commission, Credit Suisse impliedly admitted that its marketing materials about how it routed orders to various trading platforms were misleading.
Unlike prior cases, which involved the banks misleading investors in their own dark pools, the main case against Credit Suisse centers on problems with its now-closed order router known as Retail Execution Services (RES).
Credit Suisse’s routing model was said to be able to determine the best pools of liquidity on an order-by-order basis. The SEC, however, said this was not the case.
The SEC’s order states that from mid-2011 to March 2015, the firm sent millions of non- reportable orders that the router would have otherwise sent elsewhere if it operated the way the bank had described.
It further explains: “RES disproportionately used a routing tactic that generally caused market impact and resulted in less favorable execution prices for customers, despite claiming to benefit RES’s customers. The use of this routing tactic provided RES an opportunity to profit from its execution of the final portions of those customer orders internally.”
