Skip to main content

In the Matter of Credit Suisse

Oct. 20, 2021

On October 19, 2021, Credit Suisse Securities (Europe) Limited (“CSSEL”) entered a guilty plea to one count of criminal conspiracy with the U.S. Department of Justice related to defrauding U.S. and international investors in the financing of an $850 million loan for a tuna fishing project in Mozambique.[1] One consequence of CSSEL’s guilty plea is the triggering of section 9(a) of the Investment Company Act of 1940, which, absent Commission action, automatically disqualifies CSSEL affiliates from, among other things, serving as investment advisers or principal underwriters to certain types of investment companies.[2] The affiliated investment fund service providers, who are applicants for relief here, were not involved in the actions leading to CSSEL’s guilty plea, and funds they serve are not alleged to have been harmed by CSSEL’s conduct. Disqualifying these affiliates from continuing to serve as advisers, subadvisers, and underwriters for nearly sixty funds would be unwarranted and, more importantly, would harm the funds and their shareholders. Accordingly, I support the Commission’s issuance of a temporary order and notice of application for a permanent order exempting named Credit Suisse entities from the provisions of section 9(a). My support, however, is not as enthusiastic as it might be.

Section 9(c) allows the Commission, under the appropriate circumstances, to grant relief from the draconian consequences of section 9(a) “either unconditionally or on an appropriate temporary or other conditional basis.”[3] In this case, rather than simply grant the Credit Suisse affiliates the necessary relief, the Commission has chosen to impose a number of needless conditions upon the affiliates, with one potentially being deleterious. Had the Commission limited its conditions to prohibiting the Credit Suisse affiliates from employing individuals linked to CSSEL’s criminal transgressions, I could have supported this action without objection because it would serve the statutory purpose of protecting the funds and fund investors. Unfortunately, the Commission has decided to condition this needed relief on certifications and reports that serve no discernible purpose.

In what way, for instance, will the Commission’s oversight of fund service providers be enhanced by requiring Credit Suisse to submit to the Chief Counsels of the Commission’s Divisions of Investment Management and Enforcement reports detailing the organization’s progress in implementing the Transparent Lending Covenant? Providing greater transparency in lending arrangements susceptible to misconduct is a commendable goal, but how will conditioning 9(c) relief for investment advisers not involved in any wrongdoing upon the submission of three successive annual reports help achieve this goal?

More troubling is the requirement that Credit Suisse’s Chief Compliance Officer (“CCO”) submit a series of annual certifications attesting to Credit Suisse’s adherence to its plea and deferred prosecution agreements with the Justice Department, as well as the terms of the Commission’s order. I have spoken publicly of my concern that we may be placing undue pressures on CCOs.[4] Mandating certifications of the sort found in this order can only increase CCO anxiety over heightened personal liability. If the Commission has concerns that the applicants are not meeting their obligations, then the proper response is a visit from an exam team, not the approach we have taken here.

The Applicants had little choice but to agree to whatever conditions the Commission imposed. The alternative would have caused the funds they serve to find new service providers, an outcome that would have been very disruptive and costly for those funds and their shareholders. I too have little choice but to support this order, given the severe consequences of section 9(a). I hope that when faced with a similar application in the future, we will manage to display greater forbearance and impose only such conditions as are necessary to protect the funds at issue, which, after all, is the whole purpose of section 9.

[1] See U.S. Department of Justice, “Credit Suisse Resolves Fraudulent Mozambique Loan Case in $547 Million Coordinated Global Resolution,” October 19, 2021, [Press release], The SEC brought and settled a related action with Credit Suisse, which I supported. This action did not involve the funds or their Credit Suisse service providers. See U.S. Securities and Exchange Commission, “Credit Suisse to Pay Nearly $475 Million to U.S. and U.K. Authorities to Resolve Charges in Connection with Mozambican Bond Offerings,” October 19, 2021 [Press release],

[2] 15 U.S.C. 80a-9(a).

[3] 15 U.S.C. 80a-9(c).

[4] Peirce, H.M. (2020). When the Nail Fails – Remarks before the National Society of Compliance Professionals [Speech transcript].

Return to Top