Credit Suisse pays $196M SEC settlement
Deal comes as federal authorities escalate criminal probe into allegations Credit Suisse and other Swiss banks helped U.S. clients duck taxes on assets in offshore accounts.
Credit Suisse is paying $196 million and admitting wrongdoing to settle civil charges it violated federal securities laws by providing financial advisory services to thousands of U.S. clients without registering with a federal regulator.
But the global Swiss bank headquartered in Zurich remains under criminal investigation on suspicions it also helped wealthy American clients evade millions of dollars in taxes on assets hidden in offshore accounts.
Formalizing the civil agreement Friday, the Securities and Exchange Commission said Credit Suisse collected approximately $82 million in fees by assigning relationship managers to solicit U.S. clients, provide investment advice and help in executing securities transactions — all without the required registration.
“The broker-dealer and investment adviser registration provisions are core protections for investors,” said Andrew Ceresney, director of the SEC’s enforcement division, in announcing the settlement order. “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.”
Credit Suisse said the full cost of the repayment, interest charges and penalty required by the settlement is covered by the increase in litigation provisions the Zurich-based global bank made during the fourth quarter of 2013.
“We are pleased to have resolved this issue,” said the bank, which added that it is continuing efforts to resolve the Department of Justice probe on the tax-evasion issues.
According to the SEC, Credit Suisse began offering brokerage services for U.S. clients as early as 2002. Relationship managers made roughly 107 secretive trips to the U.S. from 2002-2009 to sign up and provide investment services to the clients.
The bank ultimately represented up to 8,500 U.S. customer accounts that held an average total of $5.6 billion in securities assets, the SEC order showed.
Credit Suisse only began winding down the cross-border financial advisory business in 2008, amid news that federal authorities were pursuing larger rival UBS on charges the Swiss banking giant had helped wealthy Americans duck taxes on assets hidden in offshore accounts.
UBS in 2009 reached a deferred-prosecution agreement with U.S. authorities by acknowledging wrongdoing, paying $780 million in penalties and agreeing to turn over data on an estimated 4,450 wealthy American clients.
The landmark agreement broke deep cracks in traditional Swiss banking secrecy. So far, dozens of American clients who evaded taxes with UBS help have either pleaded guilty or been convicted in federal court trials.
Federal authorities escalated the tax-evasion crackdown last year, when Swiss bank Wegelin & Co. pleaded guilty to a criminal indictment that accused it of conspiring with American clients to hide more than $1.2 billion from the IRS. The bank, ordered to pay nearly $57.9 million in combined restitution, fine and forfeiture, has since shut down.
Assistant Attorney General Kathryn Keneally told a tax-law convention last month that 106 other Swiss banks had signed letters of intent to seek non-prosecution agreements and give federal investigators information about suspected U.S. tax evaders.
But the non-prosecution deals don’t apply to Credit Suisse and approximately 13 other Swiss banks that were previously subjects of Department of Justice tax-evasion investigations.
Separately, the Senate Permanent Subcommittee on Investigation has scheduled a Feb. 26 hearing expected to focus in part on clandestine efforts Credit Suisse and other banks undertook to sign up U.S. clients who allegedly sought help avoiding taxes.
Credit: USA Today