March 17, 2014 — In 2010, Congress established a financial fraud whistleblower program as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Insiders may be eligible for significant rewards when they collaborate with the Securities and Exchange Commission (SEC) about a firm’s failure to register with the SEC prior to providing cross-border brokerage services, or other securities law violations. Rewards for tipsters may be as much as thirty percent of the total recovery, so long as the proceeds exceed $1 million.
Credit Suisse to Pay $196 Million, Including $50 Million Penalty, to Resolve Charges Concerning Cross-Border Brokerage Services
Credit Suisse Group AG of Switzerland has been charged by the SEC with providing U.S. clients with investment advice and cross-border brokerage services even though it was not properly registered to do so. The Zurich-based firm will pay $196 million to resolve the matter.
U.S. federal securities laws require firms to register with the SEC before offering cross-border advisory and brokerage services for American clients. Yet in 2002, Credit Suisse began providing such services without following the applicable registration laws. Over time, the firm acquired around 8,500 clients in this country with a total of approximately $5.6 billion in securities assets. In servicing these clients, Credit Suisse was able to generate around $82 million in fees.
Credit Suisse relationship managers took over a hundred trips to the U.S. for the purpose of finding new clients for the firm’s broker-dealer and advisory services. When outside the U.S., the relationship managers communicated with their clients via overseas phone calls and e-mails. Though Credit Suisse designed initiatives to prevent registration violations, the firm failed to implement or monitor its own policies. When the SEC began to take action against UBS, also of Switzerland, for similar violations, Credit Suisse decided in October 2008 to get out of the cross-border advisory business. Still, although most client accounts had been transferred or closed by 2010, Credit Suisse continued as late as 2013 to collect investment adviser and broker-dealer fees on some accounts.
Whistleblowers Notify U.S. Government When Foreign Firms Violate Securities Laws by Failing to Register
Informants should learn the rules of the Dodd-Frank whistleblower program before notifying the SEC. With qui tam lawyers in Texas, California and the Washington, D.C. area, Waters & Kraus has the experience needed to protect tipsters’ rights and advance their interests. Contact us by email or phone our whistleblower attorneys at 855.784.0268 to learn more about how we can work together to do the right thing.
