FINRA Fines Credit Suisse Securities $6.5m

Credit Suisse failed to address nearly 50,000 alerts from FINRA for potential manipulative trading for a period of four years.

23 December 2019 | AtoZ Markets – The United States Financial Industry Regulatory Authority (FINRA), together with Cboe Global Markets, NASDAQ, the NYSE, and their affiliated exchanges have levied a $6.5 million fine on Credit Suisse Securities, per a FINRA filing.

Supervision and market access rule violations

The fine details violations of Supervision and Market Access Rules over a period of four years, including 2010 to 2014. During this period, Credit Suisse had offered its both broker-dealers and other institutional entities direct market access to numerous exchanges.

Over four years, Credit Suisse had executed over 300 billion shares on behalf of its direct market access clients. This activity generated over 50,000 alerts at FINRA and the Exchanges for potential manipulative trading over this period.

The alerts centered on a potential for spoofing, layering, wash sales, and pre-arranged trading. More specifically, three clients drew specific focus, accounting for the vast majority of these alerts. FINRA added:

“As gatekeepers to the U.S. markets, it is critical that firms implement a robust supervisory system and actively surveil for manipulative activity in order to protect the integrity of the markets. This case demonstrates that firms who do not reasonably do so will be held accountable.”

Was Credit Suisse not paying attention?

These three clients accounted for approximately 20 percent of the firm’s overall order flow. Despite the large frequency of alerts, FINRA and the Exchanges found that Credit Suisse failed to properly establish an adequate supervisory system.

Credit Suisse took no measures to undertake written supervisory procedures, reasonably designed to monitor for any of the potential abuses outlined above. As a result, orders for billions of shares entered US markets without being subjected to post-trade supervisory reviews.

On top of that, Credit Suisse was also put on notice of gaps in its surveillance system. For its part, Credit Suisse neither admitted nor denied the charges. The group has consented to findings levied against it as well as the $6.5 million fine.

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