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MAS penalizes Credit Suisse AG with S$3.9 million for relationship managers misconduct

The MAS has fined Credit Suisse AG S$3.9 million for misconduct by its Singapore branch relationship managers.

Inaccurate or incomplete post-trade disclosures led clients to face inflated spreads in 39 bond deals, breaching agreed rates.

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The Monetary Authority of Singapore (MAS) has announced the imposition of a S$3.9 million (approximately US$2.96 million) civil penalty on Credit Suisse AG, citing misconduct by its relationship managers (RMs) operating within the Singapore branch.

This punitive action follows an investigation uncovering discrepancies in post-trade disclosures concerning over-the-counter (OTC) bond transactions.

In a statement issued on Thursday (28 Dec), MAS revealed that Credit Suisse RMs provided clients with inaccurate or incomplete post-trade disclosures, resulting in clients being subjected to spreads higher than the bilaterally agreed rates for 39 OTC bond transactions.

Such actions directly contravened sections 201(c) and 201(d) of the Securities and Futures Act 2001 (SFA).

According to MAS, the RMs were found to have made false statements regarding executed interbank prices or omitted critical information regarding spreads charged, leading to clients incurring additional costs.

The failure to ensure accurate and complete post-trade disclosures represented a violation of regulatory standards.

The enforcement action stemmed from MAS’ thorough review of pricing and disclosure practices within the private banking industry.

Investigations pointed to Credit Suisse’s lack of adequate controls, notably in post-trade monitoring, which allowed the misconduct to persist unchecked.

In response to the findings, Credit Suisse acknowledged its liability under section 236C of the SFA and promptly paid the S$3.9 million civil penalty imposed by MAS.

“As part of the civil penalty settlement, Credit Suisse has also separately compensated its affected clients,” MAS added.

Ms Ho Hern Shin, Deputy Managing Director (Financial Supervision) at MAS, emphasized the significance of robust governance frameworks within financial institutions.

She stressed the importance of ensuring fair and transparent pricing for customers.

“We will continue to engage the banks to improve their controls in this area and will not hesitate to take firm enforcement action against financial institutions found to have breached our laws.”

SFA provisions on market misconduct

According to MAS, a civil penalty action is not a criminal action and does not attract criminal sanctions.

Implemented in early 2004, the civil penalty regime serves as a complementary measure to criminal sanctions, offering a more nuanced approach to combat market misconduct.

As per section 232 of the SFA, MAS has the authority to reach an agreement with any individual or entity for the payment of a civil penalty, irrespective of whether the party admits liability, for contravening any provisions outlined in Part 12 of the SFA.

The civil penalty, determined under section 232, may amount to three times the profit gained or loss avoided due to the contravention, with a minimum penalty set at S$50,000 (for non-corporate entities) or S$100,000 (for corporations).

Section 201(c) of the SFA explicitly prohibits any individual from knowingly making false statements in connection with the subscription, purchase, or sale of capital market products.

Likewise, section 201(d) of the SFA prohibits any individual from omitting to state a material fact necessary to prevent the statements made regarding capital market products from being misleading.

Under section 236C of the SFA, a corporation which fails to prevent or detect a contravention of any provision in Part 12 of the SFA that is committed by an employee or officer for its benefit and attributable to its negligence, commits a contravention and shall be liable to an order for a civil penalty.

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