Credit Suisse fined for failure to monitor employees’ outside brokerage accounts
Credit Suisse Securities (USA) LLC, a subsidiary of Credit Suisse Group, has agreed to pay a fine of $345,000 as a part of a settlement with the United States Financial Industry Regulatory Authority (FINRA).
From at least July 2016 to April 2019, the broker-dealer failed to establish and maintain a supervisory system reasonably designed to monitor its employees’ outside brokerage accounts.
The firm required certain employees to obtain permission prior to making certain trades in their outside personal brokerage accounts, and to comply with certain holding period requirements, to ensure that personal account trading was conducted for legitimate investment purposes.
During the relevant period, the firm failed to have in place a supervisory system or written supervisory procedures reasonably designed to ensure that the employees disclosed their outside brokerage accounts. For instance, the firm had no automated system for tracking whether new hires made the required disclosures.
Also, the firm’s Personal Account Trading (PAT) team often worked from incomplete or inaccurate new-hire lists, which were then used by the firm to notify employees of their disclosure obligations.
In addition, the firm’s Global Personal Account Trading (GPAT) system was often unable to match trade data received from the brokerage firm feeds to a specific employee. As of September 2017, the firm had a backlog of about 8,000 accounts (and some 52,000 trades associated with those accounts) that could not be matched to a specific employee.
While the firm was able to review the relevant trading activity, the inability to do so earlier led to the firm’s failure to timely monitor trading in these accounts.
In 2019, when the firm first implemented a requirement that its employees certify, on an annual basis, that they had disclosed all of their outside accounts, the firm discovered 2,700 previously undisclosed accounts. Further 400 undisclosed accounts were found during the reconciliation of exceptions. The firm had failed to monitor these 3,100 accounts for pre-clearance and holding period violations.
On top of the $345,000 fine, Credit Suisse Securities (USA) LLC agrees to a censure.
FINRA accepted Credit Suisse’s offer of settlement on April 5, 2021.