Credit Suisse Entities to Pay $10 Million for Providing Prohibited Mutual Fund Services, SEC Announces

The Securities and Exchange Commission (SEC) has revealed that Credit Suisse Securities (USA) LLC and two affiliated entities, collectively referred to as the Credit Suisse Entities, have agreed to a settlement exceeding $10 million. The settlement resolves charges brought forth by the SEC, alleging that the entities offered prohibited underwriting and advising services to mutual funds.

The SEC's action stems from an October 2022 case in which the Superior Court of New Jersey entered a consent order against Credit Suisse Securities. The case accused the entity of violating the antifraud provisions of New Jersey Securities laws in connection with its role as an underwriter for residential mortgage-backed securities. The New Jersey court's order specifically prohibited Credit Suisse Securities and its affiliates from violating state securities laws.

According to the SEC's order, this New Jersey court order also meant that Credit Suisse Securities and its affiliates were restricted from serving as principal underwriters or investment advisers to mutual funds and employees' securities companies, in accordance with the Investment Company Act of 1940. However, the SEC found that despite the court order, the Credit Suisse Entities continued to operate in these prohibited roles until the SEC granted them time-limited exemptions on June 7, 2023.

It is noteworthy that Credit Suisse was acquired by UBS Group AG on June 12, 2023, following the period in question.

Corey Schuster, Co-Chief of the Asset Management Unit, emphasized the significance of the SEC's action, stating, “Today’s action holds the Credit Suisse Entities accountable for not complying with eligibility requirements. This action reinforces the need for entities to properly monitor for events that may cause disqualification and proactively seek and obtain waivers from the Commission before becoming disqualified, or refrain from performing prohibited services.”

In settling the charges, the Credit Suisse Entities neither admitted nor denied the SEC's findings but agreed to pay more than $6.7 million in disgorgement and prejudgment interest. Additionally, they will pay civil penalties totaling $3.3 million.

The settlement underscores the SEC's commitment to enforcing compliance with regulatory requirements within the financial industry and serves as a reminder for financial entities to adhere to eligibility standards and seek appropriate waivers to avoid legal repercussions.

The GRC Report is the first word in governance, risk, and compliance news. As your trusted source for comprehensive coverage, the GRC Report keeps you informed and equipped to navigate the evolving landscape of governance, risk, and compliance. And remember, the GRC Report isn't just a news source; it's a community of professionals who share your passion for GRC excellence. Don't miss out on our insightful articles and breaking news – join the conversation and empower your GRC journey.