Updated Wednesday, April 23, 2014 as of 3:41 PM ET
Practice - Regulatory/Compliance
Credit Suisse Fined $197M for Improperly Soliciting Clients
by: Tom Schoenberg
Friday, February 21, 2014
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(Bloomberg) -- Credit Suisse Group agreed to pay $197 million and admitted that it improperly solicited thousands of American clients, ending a U.S. regulatory probe while a broader criminal investigation of tax evasion still looms.

The bank collected about $82 million in fees and amassed as many as 8,500 U.Sclient accounts from at least 2002 through 2008, the SEC said in an administrative order today. The accounts held an average total of $5.6 billion in securities assets, the SEC said.

Credit Suisse has been ensnared in a wider Justice Department probe for the past three years into Americans’ use of off-shore bank accounts to avoid taxes. Eight bankers, including Credit Suisse’s former head of North America offshore banking, were charged in 2011 with conspiring to help American clients evade taxes through secret bank accounts.

“As Credit Suisse admitted as part of the settlement, its employees for many years failed to comply with these requirements, and the firm took far too long to achieve compliance,” Andrew Ceresney, director of the SEC’s enforcement division, said in the statement. “The broker-dealer and investment advisor registration provisions are core protections for investors.”

The Zurich-based lender set aside 295 million francs ($332 million) in 2011 for U.S. tax matters in addition to funds set apart for the SEC matter.

SENATE HEARING

The U.S. Senate Permanent Subcommittee on Investigations will hold a hearing on Feb. 26 on the status of the tax evasion crackdown that has stalled as prosecutors conduct criminal probes of 14 banks, including Credit Suisse. Witnesses will represent an unidentified Swiss bank and the Justice Department, the committee said.

“We are pleased to have resolved this issue with the SEC,” Credit Suisse said in a statement. “The Department of Justice investigation into tax-related issues remains outstanding, and while we continue to work to resolve this matter, the timing and outcome remain uncertain.”

The settlement today includes almost $82.2 million in disgorgement, $64.3 million in prejudgment interest and a $50 million penalty.

“This isn’t the end game,” said Christopher Wheeler, a London-based analyst at Mediobanca SpA. “The Department of Justice probe can potentially result in a lot bigger fine.”

Credit Suisse admitted to the facts in the SEC order, which concluded that the bank “willfully violated” securities laws, and agreed to hire an independent consultant, according to the regulator.

‘LONG-RUNNING ISSUE’

“It’s been a long-running issue, something that we’ve been working hard on,” Chief Executive Officer Brady Dougan said in a Bloomberg Television interview this month.

UBS, Switzerland’s biggest bank, avoided criminal prosecution on tax matters by paying $780 millionand handing over data on American clients in 2009. UBS paid $200 million of the total amount to theSEC as part of the deferred prosecution agreement.

The UBS case prompted thousands of Americans to declare previously secret accounts through an IRS amnesty program.

Some 106 Swiss banks not under individual probes applied for amnesty in the U.S. for helping tax evaders under a program negotiated by the two governments, a U.S. federal prosecutor said last month. The program requires participants to disclose how they helped Americans hide assets, hand over data on undeclared accounts and pay penalties.

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