FSA has fined Credit Suisse (UK) Limited £5.95 million for systems and controls failings breaching Principle 3 in relation to sales by its private bank of structured capital-at-risk products (SCARPs). During a supervisory visit, FSA identified a number of failings in the sales of SCARPs over a period of nearly three years, during which customers invested around £1 billion in the product. The failings included:
- having 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, including not considering the balance and constituent parts of customers’ portfolios; and
- failing to monitor staff effectively to ensure that they took reasonable care when giving advice.
As a result, FSA said the firm risked selling SCARPs to many customers for whom they were unsuitable. FSA did not assess whether in any particular case a sale was unsuitable. FSA noted the firm has now made significant changes and is undertaking a past business review run by an independent third party, with a view to paying redress where due. Tracey McDermott commented that FSA considers failure to check, or show a firm has checked, suitability is of critical importance in the wealth management industry. She said this was highlighted in FSA’s “Dear CEO” letter in June 2011. (Source: FSA Fines for SCARP Systems and Controls Failings)