Shares of Credit Suisse Group AG (NYSE: CS) rose more than 1.50 percent on Wednesday even though the company was slapped with a $90 million fee from the U.S. Securities and Exchange Commission (SEC).
Granted, a $90 million fee is essentially pocket change for any international bank, but what’s notable is the fact that the SEC forced Credit Suisse to admit wrongdoing.
The SEC accused Credit Suisse of misrepresenting how it determined a key performance metric within its wealth management segment. As part of the settlement, the bank acknowledged its wrongdoing and a former executive settled the charge which he took responsibility for.
The executive in question is Rolf Bogli, the bank’s former chief operating officer in charge of Credit Suisse’s banking division. His wrongdoings include pressuring employees to classify certain high net worth and ultra-high net worth clients assets as NNA (net new assets).
Employees classified its clients assets as NNA in order to achieve certain targets established by senior management. Banking investors and anyone following the news reports should find the charge somewhat familiar.
Wells Fargo (NYSE: WFC) hasn’t admitted to wrongdoing but it is accused of opening various accounts for clients against their wishes or without them knowing. It is believed that this was done so managers could achieve sales targets and take home performance bonuses.
As noted by the SEC, “NNA is a metric valued by investors in financial institutions to measure success in attracting new business.”
Andrew Ceresney, Director of the SEC’s Enforcement Division explained:
“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. 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.”
Credit Suisse, along with many other banks and financial institutions, are finding 2016 to be a difficult year, at least for their stocks. Shares of Credit suisse have lost nearly 40 percent since the start of 2016 and nearly 45 percent over the past year. By comparison, the Financial Select Sector ETF (NYSE: XLF), an ETF which tracks the performance of the financial sector, has lost more than 17 percent since the start of 2016 but is lower by 13 percent over the past year.