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Credit Suisse Securities Fined $6.5 Million for Supervision and Market Access Rule Violations

Levin Law | 2.20.2020
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FINRA and Others Issue Censure Against Credit Suisse for Multiple Violations

According to a News Release issued by the Financial Industry Regulatory Authority (FINRA), Credit Suisse Securities (USA) LLC has been fined $6.5 million for supervisory and Market Access Rule violations.  FINRA, joined by Cboe Global Markets, The Nasdaq Stock Market LLC, the New York Stock Exchange, and their affiliated Exchanges announced the censure on December 23, 2019.

According to the release, from 2010 to 2014, Credit Suisse offered clients direct market access to several exchanges.  Trading activity generated by these direct market access clients generated “over 50,000 alerts at FINRA and the Exchanges for potential manipulative trading, including spoofing, layering, wash sales and pre-arranged trading.”  During this time, FINRA and the Exchanges allege that Credit Suisse failed to establish a supervisory system to monitor for potential manipulative trading. Despite an internal audit report noting gaps in their surveillance system, Credit Suisse failed to implement a supervisory system.

FINRA and the Exchanges also allege that Credit Suisse failed to adhere to provisions of Rule 15c3-5 of the Securities Exchange Act of 1934 known as the Market Access Rule.  This rule “requires broker-dealers that provide their customers access to an exchange or an alternative trading system to reasonably manage the financial and regulatory risks of providing such access.”

In 2010, the Securities and Exchange Commission (SEC) implemented Rule 15c3-5 to address specific vulnerabilities in the market and reduce risks associated with market access. To comply with Rule 15c3-5 brokers or dealers with access to trading securities directly on an exchange or alternative trading system and broker-dealer operators that provide access to trading securities directly on their alternative trading system must “establish, document and maintain a system of risk management controls and supervisory procedures that, among other things are reasonably designed to

(1)   Systematically limit the financial exposure of the broker or dealer that could arise as a result of market access, and

(2)   Ensure compliance with all regulatory requirements that are applicable in connection with market access.”

According to FINRA and the Exchanges, Credit Suisse failed to comply with these regulations.  While Credit Suisse did not admit or deny the allegations, they did consent to the findings.

Attorney Brian Levin fights for victims of financial fraud and stockbroker misconduct.  When broker-dealers and banks firms fail to implement supervisory systems that adequately protect their customers, they can be held liable for ensuing losses.  Contact Levin Law today at (305) 402-9050 or for a free case evaluation.

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