FSA slaps CSFBi with £4 million fine

Formerly called Credit Suisse Financial Products (CSFP), CSFBi is authorised in the UK. Between 1995 and 1998 CSFP attempted to mislead the Japanese authorities by concealing and removing evidence about the extent and type of its derivatives business in Japan, the FSA said.

In addition, CSFP prepared false explanations about its Japanese business activities because it feared that the Japanese financial regulator might conclude it was doing business without the necessary Japanese licence. CSFP also thought the tax authority might decide that this business should be taxed in Japan.

CSFBi has admitted the charges, the FSA added, but since these events it has made “extensive changes to improve standards of ethics and professionalism", said the UK watchdog. These changes have resulted in significant improvements in CSFBi’s compliance culture generally, the FSA noted.

“The unprecedented size of the fine makes it clear that we consider any attempt to mislead regulators and other authorities, whether in the UK or in other countries, to be an extremely serious issue," said Carol Sergeant, FSA managing director responsible for enforcement. "Ensuring that firms have organisational cultures that prevent this type of behaviour is essential to maintaining the confidence we all expect to have in our financial markets."

Until April 1997, CSFP marketed derivatives products in Japan via another company within the Credit Suisse group called CS First Boston Japan Limited (CSFB JL). CSFB JL’s licence only allowed it to undertake securities transactions, not banking business on behalf of CSFP. Over time, CSFP became concerned that the Japanese regulator might consider some of the transactions undertaken by CSFB JL on behalf of CSFP to be banking business. As a result, in preparation for a regulatory inspection, CSFP arranged to stop sending reports that it normally sent to CSFB JL. These reports included monthly management accounts and estimates of trading revenue.