CSFB handed record fine for UK derivatives trades

The Securities and Futures Authority (SFA), a subsidiary of the Financial Services Authority (FSA), has fined investment bank Credit Suisse First Boston (CSFB) a total of £540,000, for two breaches of its FSA Principle 9 regulatory standard. The amount is one of the largest single fines levied by the regulatory body.

In the first incident CSFB was fined £400,000 for not properly overseeing its derivatives products business. The SFA said a CSFB trader provided two customers with misleading documentation and inaccurate valuations of complex derivatives that CSFB sold between February 1998 and June 1999. This meant the customers were not properly informed about the risks of the derivatives, nor were they aware that they were making substantial losses by holding them.

In a second incident, CSFB was fined £140,000 for failing to properly supervise its former head of convertible trading, Mushtaq Shah.

Shah, it was alleged, overstated his month-end profits from August 1998 to April 1999. The SFA fined Shah £50,000 and has suspended him from the SFA register for one year.