Credit Suisse Securities (USA) LLC agreed to pay a fine of US $6.5 million to the Financial Industry Regulatory Authority and multiple securities exchanges for purportedly not complying with the Securities and Exchange Commission’s Market Access Rule following its effective date on July 14, 2011, through July 2014. Among other things, claimed FINRA, Credit Suisse did not implement “effective” post-trade controls to monitor potential manipulative activity by three clients that generated over 50,000 alerts at FINRA during the relevant time. Among other things, charged FINRA, from July 2010 through October 2013, the firm allegedly did not have an automated system to detect potential spoofing and layering activity.
After the firm implemented an automated system through April 2014, it still failed to detect problematic activity by the three customers. Only after Credit Suisse made changes to its automated system in late April 2014 did it begin to detect the three customers’ problematic activity and terminate the three customers.
As part of its settlement, Credit Suisse also agreed to confirm certain remediation steps it has taken to enhance its surveillance and procedures designed to monitor for potentially manipulative trading.
Reg MAR – adopted by the Securities and Exchange Commission in 2010 – generally requires a broker or dealer with access to trading securities directly on an exchange or alternative trading system to have procedures and controls reasonably designed to limit their financial exposure as a result of such access and ensure compliance with all applicable regulatory requirements. (Click here to access Reg MAR, SEC Rule 15c3-5. Click here for helpful answers to frequently asked questions related to Reg MAR provided by the SEC’s Division of Trading and Markets.)