Between January 2007 and December 2009, Credit Suisse’s private bank clients invested over £1bn in Scarps – defined as products that provide income, but also expose investors to the risk that they may lose all or part of their initial capital.
A supervisory visit by the regulator found that a number of serious failings occurred during that period, including inadequate systems and controls in relation to assessing clients’ attitudes to risk. The company also failed to take reasonable care to properly evidence the suitability of Scarps for clients and also failed to monitor staff effectively to ensure that they took reasonable care when giving advice.
The FSA said Credit Suisse had since made a significant 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 clients. The firm has also agreed to carry out a past business review, overseen by an independent third party, in relation to Scarp purchases during the period identified.
Tracey McDermott, acting director of enforcement and financial crime at the FSA, said: “We have seen all too frequently the consequences of financial services firms failing to implement proper systems and controls to ensure their customers invest in suitable products. A proper assessment of customers’ individual needs and circumstances is even more critical where 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.”
