The Financial Services Authority (FSA) has fined Credit Suisse (UK) Limited (Credit Suisse UK) £5.95 million for systems and controls failings in relation to sales by its private bank of structured capital at risk products (SCARPs).
SCARPs are complex financial products that provide income to customers but also expose them to the risk that they lose all or part of their initial capital. Between January 2007 and December 2009 Credit Suisse UK customers invested over £1 billion in SCARPs. However, during that period there were a number of serious failings in the systems and controls in respect of those sales. These included:
- Inadequate systems and controls in relation to assessing customers' attitudes to risk;
- Failing to take reasonable care to properly evidence the suitability of SCARPs for customers; and
- Failing to monitor staff effectively to ensure that they took reasonable care when giving advice.
Concerns were identified by the FSA during a supervisory visit to the firm, which subsequently led to the FSA commencing its enforcement investigation. The FSA has found that Credit Suisse UK had poor systems and controls in place and failed to maintain adequate records regarding its advice on these products. These failings amounted to a breach of Principle 3. As a result, customers were exposed to an unacceptable risk of being sold a SCARP that was unsuitable for them.
Since the discovery of these failings, Credit Suisse UK has 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 customers. Credit Suisse UK 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. 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.
Credit Suisse UK agreed to settle at an early stage entitling it to a 30% discount on its fine.
Tracey McDermott, acting director of enforcement and financialcial crime, 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."