The Financial Services Authority has fined the UK sector of Credit Suisse a hefty 6 million pounds because of poor advice given to customers when selling structured capital at risk products (SCARPs).
The bank was criticised over its Scarps systems and controls.
The FSA has accused Credit Suisse of not taking enough care regarding their clients’ attitude to risk from the time between January 2007 and December 2009.
Scarps are intended to produce an income that is dependant on the performance of the FTSE 100 and other markets, in addition to baskets of shares. However, there is an in-built risk that investors could lose all or part of the sum invested.
While Credit Suisse customers invested more than 1 billion pounds in these products over the three years mentioned, the firm lost around 192 million during this period. Additionally, the bank had advised 623 customers to invest in Scarps over the period in question.
The FSA says that Credit Suisse failed to pay attention to its customers’ attitudes to risk, and said that the bank needs to implement “proper systems and controls” to make sure that their customers are investing in suitable products.
The agency also reported that the fine was reduced from 8.5 billion pounds down to 5.95 million because of an earlier settlement during initial investigations in the case.
Issues at hand
The FSA accuses Credit Suisse of not only failing to asses their customers’ attitude to risk, but also not taking proper care to see if Scarps were suitable for individual investors.
They say that when selling complex financial products such as Scarps, it is even more important to assess a customer’s individual needs and lifestyles.
Credit Suisse is also being fined because the FSA found that they have not monitored their staff properly to ensure they were giving careful financial advice.
The bank said in a statement that it deeply regrets its failings, and that they have since been fixed.