| 1. |
The Financial Supervisory Agency ("the FSA" hereafter) conducted on-site
inspection at the Credit Suisse Financial Products Bank, Tokyo Branch ("CSFP, Tokyo
Branch" hereafter), the Credit Suisse Trust and Banking Co. Ltd., Credit Suisse First
Boston Bank, Tokyo Branch, Credit Suisse First Boston Securities (Japan) Ltd., the Credit
Suisse Asset Management Ltd. ("CS Group establishments in Japan" collectively),
and the Kokusai Asset Management Co., Ltd. ("Kokusai Asset
Management") since January 1999, and on July 13, 1999, notified them the inspection
results.
|
| 2. |
According to the inspection results,
| (1) |
The CSFP, Tokyo Branch was found to have conducted: systematic evasions and
obstructions of inspections; businesses which deeply undermine the soundness of the
Japanese financial markets and financial institutions, and thereby are detrimental to
public interests, by the voluminous, repetitive and continuous productions and sales of
financial products extremely inappropriate from the standpoint of adequate disclosure of
its clients' financial conditions; and activities which violate the Banking Law and the
Securities and Exchange Law, including offence against the ban on securities businesses by
banks.
|
| (2) |
The Credit Suisse Trust and Banking Co. was found to have misused trust accounts to
make possible transactions extremely inappropriate from the standpoint of adequate
disclosure of its clients' financial conditions, and participated in such transactions in
voluminous, repetitious and continuous manner. Such deeds deeply undermined the soundness
of the Japanese financial markets and financial institutions and were detrimental to
public interests. Also some departments of the Credit Suisse Trust and Banking Co. were
found to have conducted evasive and obstructive actions toward the inspections. In
addition, its compliance system etc. was found to be less than sufficient.
|
| (3) |
Other CS Group establishments in Japan and the Kokusai Asset Management were found
conducting activities against laws and regulations and/or being insufficient in compliance
system, etc.
|
It is deeply regretful that the CS Group establishments in Japan and the Kokusai Asset
Management were found conducting activities against laws and regulations and/or being
insufficient in compliance system, etc.
|
| 3. |
Having regard for the above inspections results, and having provided opportunities for
hearings and submissions of written explanations according to the Administrative Procedure
Law, the Financial Reconstruction Commission ("the FRC" hereafter) and the FSA
decided on administrative actions today. The FRC has decided on the administrative action
to revoke the license of the CSFP, Tokyo Branch. The FSA has decided to order the Credit
Suisse Trust and Banking Co. Ltd. suspension of specified new businesses and strengthening
of its compliance system, etc. The FSA has also decided to take administrative actions to
the other CS Group establishments in Japan and the Kokusai Asset Management, as stated in
the appendix, according to each violation or problems.
The CS Group establishments in Japan and the Kokusai Asset Management are expected to take
necessary actions expeditiously to comply with the orders.
|
| 4. |
The products the CSFP, Tokyo Branch produced and sold, such as those utilizing credit
liquidation scheme, are extremely inappropriate from the standpoint of adequate disclosure
of its clients' financial conditions.
The introduction of mark to market accounting for financial products in the accounting
period starting from April 2000 will remove the basis for such transactions. In order to
clarify the accounting treatment meanwhile, however, we have asked the Certified Public
Accountants Association to examine the accounting treatment for such transactions.
|
| 5. |
Also, the deliberate raising of capital adequacy ratio through utilization of these
kinds of products by the financial institutions is not in line with the FSA's Guideline
for Supervision.
With regard to the customer financial institutions, we will proceed to probe into the
transactions they made with the CSFP, Tokyo Branch and address the matter appropriately
according to laws and regulations.
|
| 6. |
With the measures listed above, the FSA will strive to prevent recurrence of such
cases. Through appropriate use of supervisory means such as inspection and monitoring, we
will continue to do our best to secure the soundness of business conduct of financial
institutions.
|
| 1. |
Credit Suisse Financial Products Bank, Tokyo Branch
(referred to as "the CSFP, Tokyo Branch" hereafter)
The CSFP, Tokyo Branch was found to have carried out the following activities:
| A) |
the CSFP, Tokyo Branch conducted systematic evasions and
obstructions of on-site inspections by the Financial Supervisory Agency. Such is
considered to constitute an "act of evading and obstructing the inspections"
stated in the Banking Law Article 63-3;
|
| B) |
the CSFP, Tokyo Branch conducted businesses which deeply undermine the soundness of
the Japanese financial markets and financial institutions through voluminous repetitive
and continuous productions and sales of financial products extremely inappropriate from
the stand point of adequate disclosure of its customers' financial conditions. Such
constitutes an "act detrimental to public interests" stated in the Banking Law
Article 27;
|
| C) |
the CSFP, Tokyo Branch violated the Banking Law Article 12, the Securities and
Exchange Law Article 65 and other related laws by actively soliciting such products as
stock price linked bonds through compiling and explaining proposals by the bank itself.
|
Based on the above findings, the following administrative actions are
taken:
| (1) |
revocation of bank license which shall takes effect on November 30,
1999 (pursuant to the Banking Law Article 27);
|
| (2) |
suspension of the business of the branch for the period from August
5, 1999 to November 29, 1999, in which unwinding of existing transactions and operation
incidental thereto are excluded from the scope of the suspension. (pursuant to the Banking
Law Article 27).
|
|
| 2. |
Credit Suisse Trust and Banking Co. Ltd.
(referred to as "the CS Trust and Banking Co." hereafter)
The CS Trust and Banking Co. was found to have conducted the following activities:
| A) |
the CS Trust and Banking Co. misused trust accounts to make possible transactions
extremely inappropriate from the standpoint of adequate disclosure of its clients'
financial conditions, and participated in such transactions in voluminous repetitive and
continuous manner. Such deeds deeply undermined the soundness of the Japanese financial
markets and financial institutions and were detrimental to public interests. Such
constitutes an "act detrimental to public interests" stated in the Banking Law
Article 27;
|
| B) |
some departments of the CS Trust and Banking Co. conducted acts which are considered
to constitute an "act of evading and obstructing the inspections" stated in the
Banking Law Article 63-3;
|
| C) |
the CS Trust and Banking Co. conducted activities which violate fiduciary duty of a
trustee of trust, and was found that its compliance system and internal management
structure were far less than sufficient.
|
Based on the above findings, the following administrative actions are
taken:
| (1) |
from August 5, 1999, the businesses of acquiring new contracts in the following area
are suspended: (a) money claims trusts (excluding lease receivable trusts and credit
receivable trusts and etc.), (b) money entrusted, other than money trust, (c) securities
trusts, and (d) specified claim trust (excluding contracts related to pension funds)
(pursuant to the Concurrent Trust Business Law Article 8) (referred to as "the
Concurrent Business Law" hereafter);
|
| (2) |
from August 5, 1999, the following businesses are suspended: (a) trustee business with
individual customers (excluding operation on fund management of the existing trusts until
the date of the maturity) and (b) operations related to soliciting new customers, and
operation related to acting as intermediaries or agents between customers and the parent
bank in Switzerland (pursuant to the Banking Law Article 27 and the Concurrent Business
Law Article 8); (Note: After August 5, 2000, the Financial Supervisory Agency may review
the two orders (1) and (2) above based upon the improvement of businesses operations
including compliance system and personnel structure, and the appropriateness of the
business improvement plan to be submitted by the CS Trust and Banking Co. concerning the
suspended business if the CS Trust and Banking Co. requests to resume operations related
to (1) and (2) above.)
|
| (3) |
a business improvement order is issued, which requires the CS Trust and Banking Co.
following: (a) strengthening of compliance system, (b) fundamental restructuring in
management structure, including personnel, and (c) the third party carrying out follow-ups
and evaluations of implementation process of the policy for strengthening its internal
management. An order is issued to submit business improvement plan containing the plan to
improve preceding issues by September 28, 1999 (pursuant to the Banking Law Article 26-1,
and the Concurrent Business Law 4, which corresponds with the Trust Business Law Article
18);
|
|
| 3. |
Credit Suisse First Boston Bank, Tokyo Branch
(referred to "the CSFB, Tokyo Branch" hereafter)
The CSFB was:
| A) |
found to be lacking the basic management structure and function necessary for a branch
office, including a person responsible to control and manage the branch office as a whole;
|
| B) |
found to be lacking adequate internal control system and compliance system.
|
Based on the above findings, the following administrative actions are taken:
| (1) |
a business improvement order to establish unified internal control system and
solidifying and strengthening the line of command for compliance, and an order to submit
business improvement plan containing the plan to improve preceding issues by September 28,
1999 (pursuant to the Banking Law Article 26-1);
|
| (2) |
from August 5, 1999 to August 4, 2000, the CSFB Bank is prohibited from conducting new
business operations concerning private banking (operations related to soliciting new
customers and/or operation related to acting as intermediaries or agents between customers
and the parent bank in Switzerland) and concerning productions or sales of financial
products utilizing derivatives or credit liquidation (excluding operations for risk
hedging) (pursuant to the Banking Law Article 26-1).
|
|
| 4. |
Credit Suisse First Boston Securities (Japan) Limited,
(referred to as "the CSFB Securities" hereafter)
The CSFB Securities was found to have carried out the following activities:
| A) |
offence against the ban on "street name lending".
|
Based on the above findings, the following administrative actions are taken:
| (1) |
An order to suspend from August 5 to September 4, 1999 all business operations (except
for such operations as the acceptance of sales order of securities on safe deposit without
soliciting) of the divisions responsible for the violation (Domestic Debt Capital Markets
Group and Product Development Group) (pursuant to the Law on Foreign Securities Firms
Article 24-1)
|
| (2) |
An order to prohibit the employees of the CSFP, Tokyo Branch involved in inappropriate
operations during the inspection period to carry out business operations concerning
derivatives or credit liquidation at the CSFB Securities, and the employees who were
employed at the CS Trust Banking Co. during the inspection period to carry out business
operations concerning brokerage operations for its Swiss parent bank and business
operations concerning finding new customers at the CSFB Securities, from July 29, 1999 to
January 28, 2000. (pursuant to the Law on Foreign Securities Firms Article 24-1)
|
|
| 5. |
Credit Suisse Asset Management Limited
(referred to as "the CS Asset Management" hereafter)
The CS Asset Management was found with the following:
| A) |
the CS Asset Management did not make documents which recorded content of securities
trading concerning investment made according to discretionary investment contracts, etc.;
|
| B) |
the CS Asset Management did not deliver documents, etc. that should have been
delivered to customers when concluding discretionary investment contracts, etc.;
|
| C) |
the CS Asset Management was found to be lacking adequate internal control and
compliance system, which led to the violation of fiduciary duty as an investment advisor,
etc.
|
Based on the above findings, the following administrative actions are taken:
| (1) |
An order to prohibit the conclusion of a new contract relating to investment advisory
and discretionary investment management businesses from August 5 to September 4, 1999.
(pursuant to the Law for Regulating Securities Investment Advisory Business Article 38
[executive authority of the Head of the Local Finance Bureau] and 39)
|
| (2) |
A business improvement order to clarify locus of responsibility, to make prevention
measures against recurrence, to solidify and strengthen internal control system, and to
secure strict compliance, etc.
(pursuant to the Law for Regulating Securities Investment Advisory Business Article 37
[executive authority of the Head of the Local Finance Bureau] )
|
|
| 6. |
Kokusai Asset Management Co., Ltd.
(referred to as "the Kokusai Asset Management" hereafter)
The Kokusai Asset Management was found with the following:
| A) |
the Kokusai Asset Management dealt in financial products that were not permitted as
objects of investment based on discretionary investment contracts;
|
| B) |
the Kokusai Asset Management carried out securities trading for the customers who
concluded investment advisory contracts;
|
| C) |
the Kokusai Asset Management did not make documents which recorded content of
securities trading concerning investment based on discretionary investment contracts,
etc.;
|
| D) |
the Kokusai Asset Management was found to be lacking adequate internal control system
and compliance system, which led to inadequate activities to introduce structured bonds to
postpone losses to the customers who contracted discretionary investment contracts.
|
Based on the above findings, the following administrative actions are taken:
| (1) |
An order to prohibit the conclusion of a new contract relating to investment advisory
or discretionary investment management businesses from August 5 to November 4, 1999.
(pursuant to the Law for Regulating Securities Investment Advisory Business Article 38
[executive authority of the Head of the Local Finance Bureau] and 39)
|
| (2) |
A business improvement order to clarify locus of responsibility, to make prevention
measures against recurrence, to solidify and strengthen internal control system and to
secure strict compliance, etc.
(pursuant to the Law for Regulating Securities Investment Advisory Business Article 37
[executive authority of the Head of the Local Finance Bureau] ) |
|
