FSA fines Credit Suisse UK £5.95m for systems and control failings
The UK’s Financial Services Authority (FSA) has fined Credit Suisse UK £5.95m for systems and controls failings in relation to sales by its private bank of structured capital at risk products known as Scarps.
Scarps are complex financial products that provide income to customers but expose them to the risk that they could lose all or part of their initial capital.
Between January 2007 and December 2009 the bank’s customers invested more than £1bn in these instruments. The FSA said there were a number of serious failings regarding those sales.
There were inadequate systems and controls for assessing customers’ attitudes to risk, the bank had failed to take reasonable care to demonstrate the suitability of these products for its customers; and it had failed to monitor staff effectively to ensure that they took reasonable care when giving advice.
The FSA said Credit Suisse UK had poor systems and controls in place and failed to maintain adequate records regarding its advice on these products. As a result customers were exposed to an unacceptable risk of being sold a product that was unsuitable for them.
Since the discovery of these failings, Credit Suisse UK has made a number of changes to its advisory processes and has enhanced the systems and controls in place to ensure the suitability of its advice to its customers, the FSA said in a statement.
The bank has also agreed to carry out a review of past business, overseen by an independent third party, in relation to Scarp purchases during the period. If a customer is found to have been advised to purchase an unsuitable product, redress will be paid to the customer by Credit Suisse UK to ensure that they have not suffered financially as a result. The bank has also agreed to settle at an early stage entitling it to a 30% discount on the fine.
Tracey McDermott, FSA acting director of enforcement and financial crime, said a proper assessment of customers’ individual needs and circumstances is critical when firms are selling complex products like Scarps.
“Credit Suisse UK’s systems were not up to the level we, and their customers, are entitled to expect. Our recent ‘Dear CEO’ letter to the wealth management industry made it clear that significant and widespread failings exist in this area and standards need to improve. This penalty should leave firms in no doubt about our determination to make that happen,” McDermott said.