FINRA slaps a $9 million fine on Credit Suisse Securities for operational failures

FINRA fined Credit Suisse Securities $9 million for failing to comply with securities laws and rules designed to protect investors.

The regulatory organization also required Credit Suisse to certify that it has implemented supervisory systems and procedures to comply with legal requirements.

Jessica Hopper, Executive Vice President and Head of FINRA’s Department of Enforcement, said:

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. 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.


Credit Suisse violations

FINRA discovered that Credit Suisse failed to comply with the Securities and Exchange Commission’s Customer Protection Rule in two ways. First, the company is required to maintain possession or control of billions of dollars of fully paid and excess margin securities it carried for customers, which it failed to do. The second way it failed to comply with the rule is that on many occasions, the company did not accurately calculate its required customer reserve which it is required maintain in a separate account.

Additionally, FINRA found that that Credit Suisse issued thousands of research reports with inaccurate disclosures of about potential conflicts of interest and failed to include required disclosures. Credit Suisse failed to report the company that was the subject of the research report had been a client of theirs during the prior year, or that it expected to receive investment banking compensation from the subject company within the next three months.

Moreover, FINRA also highlighted that Credit Suisse failed to preserve over 18.6 billion records in a non-erasable and non-writable format, as required.

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