Credit Suisse to pay $375,000 fine to settle with FINRA for reporting deficiencies
Credit Suisse Securities (USA) LLC has agreed to pay a $375,000 fine as a part of a settlement with the Financial Industry Regulatory Authority (FINRA) for reporting deficiencies.
Between January 2010 and June 2021 Credit Suisse misreported the covered quantity of over 10,000 Over-The-Counter (OTC) short positions to the Large Options Positions Report (LOPR) in violation of FINRA Rules 2360(b)(5) and 2010.
LOPR data is used by regulators to identify holders of large options positions who may be attempting to manipulate the market in the underlying equity, leverage an option position to affect the price, or move the underlying equity to change the value of a large option position.
The accuracy of LOPR data is essential for this analysis. It is particularly important with respect to the OTC options market because there is no independent source of data for regulators to review OTC options.
Between January 2010 and June 2021, due to coding errors, the firm misreported to the LOPR the covered quantity for 10,864 OTC short positions in 1,672,222 instances. Therefore, Credit Suisse violated FINRA Rules 2360(b)(5) and 2010.
Also, from January 2010 to June 2021, the firm failed to establish and maintain a supervisory system and written supervisory procedures (WSPs) reasonably designed to achieve compliance with rules governing LOPR reporting. The firm’s supervisory system and WSPs concerning LOPR provided for supervisory reviews of LOPR reporting that included reviews of rejected records, acting-in-concert submissions, and periodic reviews for completeness.
However, the firm’s supervisory system and WSPs failed to provide for any supervisory review to determine whether the short-covered quantity information reported to the LOPR was complete and accurate. As a result, Credit Suisse failed to detect that it was misreporting the covered quantity of short positions over an 11-year period.
Therefore, Credit Suisse violated NASD Rule 3010 and FINRA Rules 3110 and 2010.5 B.
In addition to the $375,000 fine, the firm has agreed to a censure.