Credit Suisse UK is to pay £5.95m ($9.5m) to
UK regulators for failures related to the sale of structured
capital at risk products (SCARPs) to private banking clients.
The failures were discovered after a routine
inspection by the Financial Services Authority (FSA) in March
2010.
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According to the FSA, 623 of the Swiss bank’s
clients invested £1.1bn in 1,701 SCARPs between January 2007 and
December 2009.
Serious failings
During this period the FSA found that there
were a number of “serious” failings in the systems and controls
around SCARP sales, including:
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By GlobalData- 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; - Failing to monitor staff effectively to ensure that they took
reasonable care when giving advice.
Too busy to check
FSA also found that in a significant number of
cases the number of client relationship managers, which was
allocated to a given team leader or sector head, was too high; or
the relevant management had too many competing
responsibilities.
Additionally, Credit Suisse UK management
failed to adequately use its internal systems, which were intended
to demonstrate that supervisors had reviewed, among other things,
the suitability of transactions.
An internal report identified that these
reviews were sub-standard in 44% of cases, the FSA said.
Internal investigation
launched
Credit Suisse is now conducting an internal
investigation, overseen by an independent third party, in relation
to SCARP purchases during the period identified.
No indication was given over how long the
internal investigation would take.
Credit Suisse UK has agreed to reimburse
clients if they are found to have been advised to purchase an
unsuitable product.
Credit Suisse told PBI that it has
made significant improvements to its processes and controls since
2009 and it was confident that it currently complies with its
regulatory obligations.
At present, there is no indication of how many
assets were lost by bank’s UK clients as a result of SCARP
sales.
Fine reduced from £8.5m
In the past, Credit Suisse has already been
fined by the UK regulator, however, this is the first fine issued
to the private banking arm.
Credit Suisse agreed to settle the fine at an
early stage entitling the bank to a 30% discount on the initial
£8.5m charge.
As at 31 March 2011, Credit Suisse UK managed
£9.84bn worth of assets on behalf of its 5,474 customers.
