Risk & Compliance

Credit Suisse Fined $90M for Inflating Metric

The bank allegedly misrepresented it had attracted $7.6 billion in new wealth management business to meet performance targets.
Matthew HellerOctober 6, 2016
Credit Suisse Fined $90M for Inflating Metric

Credit Suisse has agreed to pay $90 million to settle charges that it misrepresented how much new wealth management business it was attracting by manipulating a key performance metric.

The “net new assets” metric tracks the total net inflow of assets under management (AUM) from new and existing clients. The U.S. Securities and Exchange Commission said Credit Suisse deliberately misclassified 7.5 billion Swiss francs ($7.66 billion) in ultra-high net worth client assets as AUM rather than assets under custody (AUC) to inflate its NNA and meet targets.

Rolf Bögli, the chief operating officer of Credit Suisse’s private banking division, pressured employees to classify assets as AUM despite their concerns that clients had not manifested the required change of intent, the SEC said.

According to an SEC administrative order, Credit Suisse inflated NNA for the fourth quarter of 2011 and the first, second and fourth quarters of 2012. The bank will pay a fine of $90 million to settle securities law violations, while Bögli agreed to pay a fine of $80,000.

“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,” Andrew J. Ceresney, director of the SEC’s Enforcement Division, said in a news release. “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.”

A bank can increase NNA by either bringing in new business or reclassifying AUC as AUM when a client indicates a change in intent and seeks advice about, or management of, assets previously classified as AUC.

“Our NNA results … have been very disappointing up until now,” Bögli told his direct reports in a Feb. 27, 2012 email. “As our capability to attract clients and new assets is of utmost importance — also externally — we need to take all possible measures in order to change this into a positive story within the next few weeks.”

In the first quarter of 2012, more than 4 billion Swiss francs in a client’s assets were reclassified, representing more than 75% of the NNA reported for that quarter by Credit Suisse’s wealth management business.