FSA fines Credit Suisse £5.95m

Credit Suisse has been fined £5.95m by the Financial Services Authority for system failures.

The fine, levied at the UK private bank division for systems and controls failings in relation to sales of structured capital at risk products (SCARPs), marks the second run-in with the FSA in as many years.

Between January 2007 and December 2009 Credit Suisse UK customers invested over £1 billion in SCARPs. During that period, however, there were a number of serious failings in the systems and controls in respect of those sales. These included:

•Inadequate systems and controls in relation to assessing customers’ attitudes to risk;
•failing to take reasonable care to properly evidence the suitability of SCARPs for customers; and
•failing to monitor staff effectively to ensure that they took reasonable care when giving advice.

Since the discovery of these failings, Credit Suisse UK has made a significant number of changes to its advisory processes and has enhanced the systems and controls in place to ensure the suitability of its advice to its customers. Credit Suisse UK has also agreed to carry out a past business review, overseen by an independent third party, in relation to SCARP purchases during the period identified. If a customer is found to have been advised to purchase an unsuitable product, redress will be paid to the customer by Credit Suisse UK to ensure that they have not suffered financially as a result.

Credit Suisse UK agreed to settle at an early stage entitling it to a 30% discount on its fine.

"We have seen all too frequently the consequences of financial services firms failing to implement proper systems and controls to ensure their customers invest in suitable products," said Tracey McDermott, acting director of enforcement and financial crime. "A proper assessment of customers’ individual needs and circumstances is even more critical where firms are selling complex products like SCARPs.

"Credit Suisse UK’s systems were not up to the level we, and their customers, are entitled to expect. Our recent ‘Dear CEO’ letter to the wealth management industry made it clear that significant and widespread failings exist in this area and standards need to improve. This penalty should leave firms in no doubt about our determination to make that happen."

Commenting, Mary Stevens of Wolters Kluwer's financial regulatory group, said: “The recent announcement of a £5.95m FSA fine against a well known private bank for senior management systems and controls failures has meant that 2011 has exceeded the 2009 total fines for the year of £35 million.

“In total 2011 to date has seen FSA financial penalties for the year reach £38,546,172.00. This represents 15% of total fines since the city regulator took over power in 2002.

Total FSA fines to date now exceed £264 million.