FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
1/25/2014 12:40 PM EST
The Securities and Exchange Commission charged HSBC’s Swiss-based private banking arm with violating federal securities laws by failing to register with the SEC before providing cross-border brokerage and investment advisory services to U.S. clients.
HSBC Private Bank (Suisse) agreed to admit wrongdoing and pay $12.5 million to settle the SEC’s charges.
“HSBC’s Swiss private banking unit illegally conducted advisory or brokerage business with U.S. customers,” said Andrew J. Ceresney, Director of the SEC’s Division of Enforcement. “HSBC Private Bank’s efforts to prevent registration violations ultimately failed because their compliance initiatives were not effectively implemented or monitored.”
According to the SEC’s order instituting settled administrative proceedings, HSBC Private Bank and its predecessors began providing cross-border advisory and brokerage services in the U.S. more than 10 years ago, amassing as many as 368 U.S. client accounts and collecting fees totaling approximately $5.7 million. Personnel traveled to the U.S. on at least 40 occasions to solicit clients, provide investment advice, and induce securities transactions. These relationship managers were not registered to provide such services nor were they affiliated with a registered investment adviser or broker-dealer. The relationship managers also communicated directly with clients in the U.S. through overseas mail and e-mails. In 2010, HSBC Private Bank decided to exit the U.S. cross-border business, and nearly all of its U.S. client accounts were closed or transferred by the end of 2011.
According to the SEC’s order, HSBC Private Bank understood there was a risk of violating the federal securities laws by providing unregistered broker-dealer and investment advisory services to U.S. clients, and the firm undertook certain compliance initiatives in an effort to manage and mitigate the risk. The firm created a dedicated North American desk to consolidate U.S. client accounts among a smaller number of relationship managers and service them in a compliant manner that would not violate U.S. registration requirements. However, relationship managers were reluctant to lose clients by transferring them to the North American desk. HSBC Private Bank’s internal reviews revealed multiple occasions when U.S. accounts that were expected to be closed under certain compliance initiatives remained open.
The SEC’s order finds that HSBC Private Bank willfully violated Section 15(a) of the Securities Exchange Act of 1934 and Section 203(a) of the Investment Advisers Act of 1940. HSBC Private Bank agreed to admit the facts in the SEC’s order, acknowledge that its conduct violated the federal securities laws, and accept a censure and a cease-and-desist order. The firm agreed to pay $5,723,193 in disgorgement, $4,215,543 in prejudgment interest, and a $2.6 million penalty.
The SEC’s investigation was conducted by Matthew R. Estabrook and David S. Karp, and the case was supervised by Laura B. Josephs. The SEC appreciates the assistance of the Swiss Financial Market Supervisory Authority.
Showing posts with label CROSS-BORDER BROKERAGE. Show all posts
Showing posts with label CROSS-BORDER BROKERAGE. Show all posts
Monday, December 1, 2014
Saturday, February 22, 2014
CREDIT SUISSE TO PAY $196 MILLION TO SETTLE SEC CHARGES OF WRONGDOING
FROM: SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission today announced charges against Zurich-based Credit Suisse Group AG for violating the federal securities laws by providing cross-border brokerage and investment advisory services to U.S. clients without first registering with the SEC.
Credit Suisse agreed to pay $196 million and admit wrongdoing to settle the SEC’s charges.
According to the SEC’s order instituting settled administrative proceedings, Credit Suisse provided cross-border securities services to thousands of U.S. clients and collected fees totaling approximately $82 million without adhering to the registration provisions of the federal securities laws. Credit Suisse relationship managers traveled to the U.S. to solicit clients, provide investment advice, and induce securities transactions. These relationship managers were not registered to provide brokerage or advisory services, nor were they affiliated with a registered entity. The relationship managers also communicated with clients in the U.S. through overseas e-mails and phone calls.
“The broker-dealer and investment adviser registration provisions are core protections for investors,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement. “As Credit Suisse admitted as part of the settlement, its employees for many years failed to comply with these requirements, and the firm took far too long to achieve compliance.”
According to the SEC’s order, Credit Suisse began conducting cross-border advisory and brokerage services for U.S. clients as early as 2002, amassing as many as 8,500 U.S. client accounts that contained an average total of $5.6 billion in securities assets. The relationship managers made approximately 107 trips to the U.S. during a seven-year period and provided broker-dealer and advisory services to hundreds of clients they visited. Credit Suisse was aware of the registration requirements of the federal securities laws and undertook initiatives designed to prevent such violations. These initiatives largely failed, however, because they were not effectively implemented or monitored.
“As a multinational firm with a significant U.S. presence, Credit Suisse was well aware of the steps that a firm needs to take to legally conduct advisory or brokerage business with U.S. clients,” said Scott W. Friestad, an associate director in the SEC’s Division of Enforcement. “Credit Suisse failed to effectively implement internal controls designed to keep its employees from crossing the line and being non-compliant with the federal securities laws.”
According to the SEC’s order, it was not until after a much-publicized civil and criminal investigation into similar conduct by Swiss-based UBS that Credit Suisse began to take steps in October 2008 to exit the business of providing cross-border advisory and brokerage services to U.S. clients. Although the number of U.S. client accounts decreased beginning in 2009 and the majority were closed or transferred by 2010, it took Credit Suisse until mid-2013 to completely exit the cross-border business as the firm continued to collect broker-dealer and investment adviser fees on some accounts.
The SEC’s order finds that Credit Suisse willfully violated Section 15(a) of the Securities Exchange Act of 1934 and Section 203(a) of the Investment Advisers Act of 1940. Credit Suisse admitted the facts in the SEC’s order, acknowledged that its conduct violated the federal securities laws, accepted a censure and a cease-and-desist order, and agreed to retain an independent consultant. Credit Suisse agreed to pay $82,170,990 in disgorgement, $64,340,024 in prejudgment interest, and a $50 million penalty.
The SEC’s investigation was conducted by senior attorneys David S. Karp and Matthew R. Estabrook under the supervision of assistant director Laura B. Josephs and associate director Scott W. Friestad. The SEC appreciates the assistance of the Swiss Financial Market Supervisory Authority.
The Securities and Exchange Commission today announced charges against Zurich-based Credit Suisse Group AG for violating the federal securities laws by providing cross-border brokerage and investment advisory services to U.S. clients without first registering with the SEC.
Credit Suisse agreed to pay $196 million and admit wrongdoing to settle the SEC’s charges.
According to the SEC’s order instituting settled administrative proceedings, Credit Suisse provided cross-border securities services to thousands of U.S. clients and collected fees totaling approximately $82 million without adhering to the registration provisions of the federal securities laws. Credit Suisse relationship managers traveled to the U.S. to solicit clients, provide investment advice, and induce securities transactions. These relationship managers were not registered to provide brokerage or advisory services, nor were they affiliated with a registered entity. The relationship managers also communicated with clients in the U.S. through overseas e-mails and phone calls.
“The broker-dealer and investment adviser registration provisions are core protections for investors,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement. “As Credit Suisse admitted as part of the settlement, its employees for many years failed to comply with these requirements, and the firm took far too long to achieve compliance.”
According to the SEC’s order, Credit Suisse began conducting cross-border advisory and brokerage services for U.S. clients as early as 2002, amassing as many as 8,500 U.S. client accounts that contained an average total of $5.6 billion in securities assets. The relationship managers made approximately 107 trips to the U.S. during a seven-year period and provided broker-dealer and advisory services to hundreds of clients they visited. Credit Suisse was aware of the registration requirements of the federal securities laws and undertook initiatives designed to prevent such violations. These initiatives largely failed, however, because they were not effectively implemented or monitored.
“As a multinational firm with a significant U.S. presence, Credit Suisse was well aware of the steps that a firm needs to take to legally conduct advisory or brokerage business with U.S. clients,” said Scott W. Friestad, an associate director in the SEC’s Division of Enforcement. “Credit Suisse failed to effectively implement internal controls designed to keep its employees from crossing the line and being non-compliant with the federal securities laws.”
According to the SEC’s order, it was not until after a much-publicized civil and criminal investigation into similar conduct by Swiss-based UBS that Credit Suisse began to take steps in October 2008 to exit the business of providing cross-border advisory and brokerage services to U.S. clients. Although the number of U.S. client accounts decreased beginning in 2009 and the majority were closed or transferred by 2010, it took Credit Suisse until mid-2013 to completely exit the cross-border business as the firm continued to collect broker-dealer and investment adviser fees on some accounts.
The SEC’s order finds that Credit Suisse willfully violated Section 15(a) of the Securities Exchange Act of 1934 and Section 203(a) of the Investment Advisers Act of 1940. Credit Suisse admitted the facts in the SEC’s order, acknowledged that its conduct violated the federal securities laws, accepted a censure and a cease-and-desist order, and agreed to retain an independent consultant. Credit Suisse agreed to pay $82,170,990 in disgorgement, $64,340,024 in prejudgment interest, and a $50 million penalty.
The SEC’s investigation was conducted by senior attorneys David S. Karp and Matthew R. Estabrook under the supervision of assistant director Laura B. Josephs and associate director Scott W. Friestad. The SEC appreciates the assistance of the Swiss Financial Market Supervisory Authority.
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