Credit Suisse fined by SEC for misleading its investors
Another week goes by, and yet another financial institution is in hot water. The SEC announced last week that Credit Suisse agreed to pay a $90 million penalty and admit wrongdoing to settle charges that it misrepresented how it determined a key performance metric of its wealth management. The bank’s process for calculating net new assets was sometimes inconsistent with its disclosures to investors and regulators. It didn’t adequately disclose what drove decisions to reclassify assets in its private bank.
In a statement, Credit Suisse said it cooperated with the SEC’s inquiry and has “undertaken appropriate internal remedial efforts.” It also said there were no allegations of internal misconduct and that “Credit Suisse clients were not harmed”.
The SEC also fined a former Credit Suisse executive $80,000 for his role in the scheme. The executive served as the Chief Operating Officer of the firm’s private banking division and neither admitted nor denied the allegations. Credit Suisse admitted that pressure from managers led to the securities violations.
More than $1 billion of a private wealth client’s assets were reclassified in the fourth quarter of 2011 as being managed by the bank, which generated higher fees than just the funds being custodied at the bank. Another customer had more than $4 billion reclassified as managed assets in the first quarter of 2012, which constituted more than 75% of net new money reported by Credit Suisse’s wealth management business that quarter.
Credit Suisse also announced that the fine was already provisioned for and won’t have an impact on Credit Suisse’s results for the third quarter.
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