Credit Suisse fined £5.95 million for systems and controls failings On 25 October, the FSA published a press release announcing that it had fined Credit Suisse (UK) Limited (Credit Suisse) £5.95 million for systems and controls failings following sales by its private bank of structured capital at risk products (SCARPS).

Between 1 January 2007 and December 2009 customers of Credit Suisse invested in excess of £1 billion in SCARPS, which carry the considerable risk of the investor losing all or part of the initial capital put into the product. During a routine supervisory visit to the firm the FSA identified a number of serious failings in the systems and controls surrounding these sales including:

  • inadequacies in the systems and controls regarding assessing customers’ attitudes to risk
  • lack of reasonable care taken to evidence the suitability of SCARPS for the customers
  • a failure to ensure that staff took reasonable care when providing advice to customers
  • a failure to maintain satisfactory records in relation to the firm’s advice on SCARPS

As a result, the FSA started enforcement action against Credit Suisse and undertook further investigative work. The FSA concluded that, during the defined period, customers of Credit Suisse were exposed to an unacceptable level of risk of being sold a SCARP that was unsuitable for them.

Credit Suisse has since changed and improved its internal systems and controls to ensure that the advice it provides to its customers is suitable for their needs and circumstances. It has also promised to pay redress to any customer who may have suffered financially as a result of its failings. Tracey McDermott, acting Director of Enforcement and Financial Crime said, “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. A proper assessment of customers’ individual needs and circumstances is even more critical where firms are selling complex products like SCARPS.”

Looking ahead: Financial Crime

On 26 October, the FSA published a speech given by Tracey McDermott, acting Director of Enforcement and Financial Crime at the FSA, on the main issues in relation to financial crime for the year ahead.

McDermott identified four “hot topics”:

  1. the impact of changing financial regulation to the FSA’s approach to tackling financial crime
  2. the FSA’s consultation on a new guide to financial crime
  3. feedback on the FSA’s thematic work in relation to antimoney laundering controls in banks
  4. enforcement

Responsibility for tackling financial crime will pass to the Financial Conduct Authority (FCA), once the new regulatory system is fully in place. McDermott explained that the FCA will build upon the work that has already been started by the FSA.

The FSA’s recent consultation on a new guide on financial crime, titled “Financial Crime: a guide for firms” has now closed and the FSA aims to set out its final policy on this by the end of 2011. The final guide will not contain rules but, rather, guidance intended to improve firms’ knowledge and understanding of how they can tackle financial crime.

Specifically in relation to enforcement action, McDermott discussed a number of recent insider dealing cases. She commented that these cases reflect the FSA’s crackdown on this type of financial crime and the enforcement action taken acts as a good deterrent to those who may also be considering exploiting their inside information. This ‘tougher’ approach to enforcement will continue under the FCA.

Useful links

Credit Suisse fined £5.95 million for systems and controls failings

http://www.fsa.gov.uk/pages/Library/Communication/PR/20 11/087.shtml

Looking forward: Financial Crime

http://www.fsa.gov.uk/pages/Library/Communication/Speeches /2011/0927_tm.shtml