Credit Suisse Paying $90 Million Penalty for Misrepresenting Performance Metric

The Securities and Exchange Commission today announced that Credit Suisse AG has agreed to pay a $90 million penalty and admit wrongdoing to settle charges that it misrepresented how it determined a key performance metric of its wealth management business.

 

A former executive agreed to settle charges that he was a cause of Credit Suisse’s violations.

 

An SEC investigation found that Credit Suisse veered from its publicly disclosed methodology for determining net new assets (NNA), a metric valued by investors in financial institutions to measure success in attracting new business.  Disclosures stated that Credit Suisse was individually assessing assets based on each client’s intentions and objectives.  But Credit Suisse at times instead took an undisclosed results-driven approach to determining NNA in order to meet certain targets established by senior management.

 

According to the SEC’s orders, Rolf Bögli, who served as chief operating officer of the firm’s private banking division, 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. 

 

“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,” said Andrew J. Ceresney, Director of the SEC’s Enforcement Division.  “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.”

 

The SEC’s orders find that Credit Suisse violated Section 17(a)(2) and (3) of the Securities Act of 1933 and Section 13(a) and (b)(2)(A) of the Securities Exchange Act of 1934 and Rules 13a-1, 13a-16, and 12b-20.  Bögli neither admitted nor denied the SEC’s findings that he was a cause of certain Credit Suisse violations.  Bögli agreed to pay an $80,000 penalty.

 

The SEC’s investigation was conducted by Matthew R. Estabrook and David S. Karp and supervised by Scott W. Friestad and Laura B. Josephs.  The SEC appreciates the assistance of the Swiss Financial Market Supervisory Authority.