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Credit Suisse to Pay $90M to SEC Over Sales Target Malfeasance

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Credit Suisse AG on Wednesday agreed to pay a $90 million penalty and admit wrongdoing to settle Securities and Exchange Commission charges that it misrepresented how it determined a key performance metric of its wealth management business to meet sales targets.

A former executive, Rolf Bögli, who served as chief operating officer of the firm’s private banking division, also agreed to settle charges that he caused some of the Credit Suisse violations by pressuring employees to veer from Credit Suisse’s publicly disclosed methodology for determining net new assets (NNA), a metric valued by investors in financial institutions to measure success in attracting new business. 

Instead of individually assessing assets based on each client’s intentions and objectives, Credit Suisse at times “took an undisclosed results-driven approach to determining NNA in order to meet certain targets established by senior management,” the SEC order states.

According to the SEC, Bögli “pressured employees to classify certain high-net worth and ultra-high-net worth client assets as NNA despite concerns raised by employees most knowledgeable about a particular client’s intent.”

Bögli “continued to press his subordinates” to identify sources of NNA, the SEC order states. In one instance, “despite being informed by his subordinate that a reclassification of Client B’s assets was ‘not expected to happen in March, more likely [a] Q2 event,’ the senior manager of Private Banking wrote: ‘Any option to speed this up? We need this inflow in March!’”

The order also states Credit Suisse was facing “significantly lower NNA than expected. While Credit Suisse’s overall NNA fluctuated in 2011, its NNA in the Wealth Management business steadily declined each quarter in 2011, and that trend had persisted into 2012.”

The SEC noted that, in an email dated Feb. 27, 2012, “a Credit Suisse Senior Manager of Private Banking informed his direct reports that ‘our NNA results…have been very disappointing up until now. As our capability to attract clients and new assets is of utmost importance—also externally—we need to take all possible measures in order to change this into a positive story within the next few weeks.’”

Bögli neither admitted nor denied the SEC’s findings that he was a cause of certain Credit Suisse violations, but agreed to pay an $80,000 penalty.

Andrew Ceresney, director of the SEC’s Enforcement Division, stated in announcing the penalty that “Credit Suisse conveyed to the investing community that it followed a structured process for recognizing net new assets when, in fact, the process was reverse-engineered to meet targets.”

Credit Suisse’s “failure to disclose this results-driven approach deprived investors of the opportunity to fairly judge the firm’s success in attracting new money.”


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