The leading knowledge platform for the financial technology industry
The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

FSA Slaps Credit Suisse UK with a £5.95m Fine for Data Failings Regarding SCARPs

The UK Financial Services Authority (FSA) has fined Credit Suisse’s UK operations £5.95 million for failing to maintain accurate records for its structured capital at risk products (SCARPs) and risk related systems and controls failures. According to the regulator, the private bank had inadequate systems and controls in place in order to assess its customers’ risk appetite and therefore did not accurately judge their suitability for investment in SCARPs, which are complex financial products that provide income to customers but also expose them to the risk that they may lose all or part of their initial capital.

Between January 2007 and December 2009 Credit Suisse UK customers invested over £1 billion in SCARPs, but these customers may not have been told the full story with regards to the risk they were exposing themselves to, says the regulator. The FSA picked up the potential failures when it conducted an on site visit at the firm; a practice that the regulator is increasing in its bid to crackdown on firms’ risk management practices.

The FSA indicates that the failures have resulted in Credit Suisse UK breaching Principle 3 of the FSA’s handbook, relating to selling products to customers that were unsuitable for them. As a result, the private bank has since made a significant number of changes to its advisory processes and has enhanced the systems and controls in place to ensure the suitability of its advice to its customers, says the regulator. It has also agreed to carry out a past business review, overseen by an independent third party, in relation to SCARP purchases during the period identified. If a customer is found to have been advised to purchase an unsuitable product, redress will be paid to the customer by Credit Suisse UK to ensure that they have not suffered financially as a result. Hence the fine is only part of the financial cost of these failings for the firm.

On 14 June 2011, the FSA sent a ‘Dear CEO’ letter to the wealth management industry, following a review of the suitability of client portfolios in a sample of firms in the sector. As part of the review, the regulator identified what it called “significant, widespread failings”. The FSA considers suitability – and the ability to demonstrate it – a key area of risk in the wealth management industry and indicates that firms in this sector are seeing, and will continue to see, an ongoing and increasing focus on these issues.

Keeping tighter control over risk management assessments and instrument data with regards to client suitability all plays into the wider data management arena. By keeping up to date records and being able to produce them on demand to the regulator, firms could avoid the financial and reputational impact of fines such as these.

You can read the FSA’s full final notice to Credit Suisse UK on the regulator’s website here.

Related content

WEBINAR

Recorded Webinar: The post-Brexit UK sanctions regime – how to stay safe and compliant

When the Brexit transition period came to an end on 31 December 2020, a new sanctions regime was introduced in the UK under legislation set out in the Sanctions and Anti-Money Laundering Act 2018 (aka the Sanctions Act). The regime is fundamentally different to that of the EU, requiring financial institutions to rethink their response...

BLOG

2021 Predictions: Change is Afoot

By Marc Murphy, CEO, Fenergo. It almost feels like the financial industry went to bed in March 2020 and woke up in 2030. Prior to the pandemic, financial institutions had been falling behind when it came to digital transformation, only increasing resources when absolutely necessary. But now, the pandemic has forced financial institutions to make...

EVENT

Data Management Summit New York City

Now in its 10th year, the Data Management Summit (DMS) in NYC explores the shift to the new world where data is redefining the operating model and firms are seeking to unlock value via data transformation projects for enterprise gain and competitive edge.

GUIDE

Entity Data Management Handbook – Seventh Edition

Sourcing entity data and ensuring efficient and effective entity data management is a challenge for many financial institutions as volumes of data rise, more regulations require entity data in reporting, and the fight again financial crime is escalated by bad actors using increasingly sophisticated techniques to attack processes and systems. That said, based on best...