The 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.
Credit Suisse must also carry out a costly past business review, overseen by an independent third party, in relation to Scarp sales.
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, 623 Credit Suisse UK customers invested over £1bn in 1,701 Scarps.
During that period there were a number of serious failings in Credit Suisse’s systems and controls in respect of those sales, including inadequate assessments of customers’ attitudes to risk.
It also failed to take reasonable care to properly evidence the suitability of Scarps for customers and failed 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 found that 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 Scarp that was unsuitable.
The FSA says 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.
If a customer is found to have been advised to purchase an unsuitable product under the past business review, Credit Suisse UK will pay redress to the customer to ensure they have not suffered financially as a result.
Credit Suisse UK agreed to settle at an early stage, entitling it to a 30 per cent discount on its fine.
FSA acting director of enforcement and financial crime Tracey McDermott says: “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.”
A Credit Suisse spokeswoman says: “We deeply regret the failings of systems and controls in the period 2007 to 2009 around the provision of advice to UK private banking clients on structured capital at risk products.
“We have made significant improvements to our processes and controls since 2009 and we are confident that we currently comply with our regulatory obligations. We fully cooperated with the FSA and are pleased to put this matter behind us.”