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Regulatory Sanctions

Credit Suisse Securities Kills 2 Birds With One Stone

May 21, 2018

[Image:  Kill Two Birds With One Stone /]


by Howard Haykin


In March, Credit Suisse Securities (USA) settled in short order two separate FINRA investigations: one pertaining to options positions, the other to forex transactions.


ERRORS WHEN REPORTING OPTIONS.    Credit Suisse Securities (USA) agreed to pay a $200K fine and to ‘rework’ its deficient internal controls and procedures concerning the reporting of options positions to the large options positions reporting (“LOPR”) system to settle regulators’ charges (FINRA and BOX) that it failed to report OTC options positions to the LOPR system.


From January 2010 through August 2015, Credit Suisse reported positions to the LOPR with inaccurate tax ID or tax type fields in millions of instances. Because the firm reported all of these positions to the LOPR and these inaccuracies did not alter the position data, the accounts were able to be identified for surveillance purposes.


In addition, the firm:

►   failed to report positions to the LOPR in an additional approximately 4,000 to 5,000 instances;
►   effected opening transactions in a single security for customer accounts acting in concert that, in aggregate, exceeded the applicable position limit on both sides of the market for 107 consecutive days;
►   failed to establish, maintain and enforce adequate supervisory or follow-up procedures and controls.  [FINRA AWC #2014042167501]


BOOKS & RECORDS VIOLATIONS – Unreconciled FOREX Transactions.    Credit Suisse Securities (USA) agreed to pay a $250K fine to settle FINRA charges that it improperly reclassified on its books and records – including its general ledger (“G/L”) - certain breaks relating to foreign exchange (“FX”) transactions in the firm’s bank accounts held at external banks.


From December 2012 through June 2013, the firm used software to reconcile the daily activity in its bank accounts at external banks against and the corresponding entries in its G/L and of these accounts. Any activity that the software did not match became a reconciling item or “break.”


However, it was an error to reclassify such unreconciled activity as the result of failed transactions because the breaks had not yet been resolved and many remained outstanding and unresolved into the following month and beyond. Consequently, the firm’s end-of-month G/L entries for these unresolved inaccurate breaks - which ranged between $20 million and $318 million – were incorrectly classified as FX Fails Payable/Receivable.  [FINRA Case #201404043110]


These cases were reported in FINRA Disciplinary Actions for May 2018.

For details on any case, go to ...  FINRA Disciplinary Actions Online, with reference to the particular Case/AWC Number.