Document ID: SEC-2014-0849-0001
Agency: sec
Document Type: Notice
Title: Applications: Credit Suisse Asset Management, LLC, et al.
Posted Date: 2014-05-23T04:00Z

[Federal Register Volume 79, Number 100 (Friday, May 23, 2014)]
[Notices]
[Pages 29826-29828]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-11929]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-31051; 812-14313]

Credit Suisse Asset Management, LLC, et al.; Notice of 
Application and Temporary Order

May 19, 2014.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Temporary order and notice of application for a permanent order 
under section 9(c) of the Investment Company Act of 1940 (``Act'').

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SUMMARY: Applicants have received a temporary order exempting them from 
section 9(a) of the Act, with respect to a guilty plea entered on May 
19, 2014, by Credit Suisse AG (``CSAG'') in the U.S. District Court for 
the Eastern District of Virginia (``District Court'') in connection 
with a plea agreement between CSAG and the U.S. Department of Justice 
(``DOJ''), until the Commission takes final action on an application 
for a permanent order. Applicants have also applied for a permanent 
order.

Applicants: Credit Suisse Asset Management, LLC (``CSAM''), Credit 
Suisse Asset Management Limited (``CSAML''), Credit Suisse Hedging-
Griffo Servicos Internacionais S.A. (``CSHG''), Credit Suisse 
Securities (USA) LLC (``CSSU''), and CSAG (each an ``Applicant'' and 
collectively, the ``Applicants''),\1\ and Credit Suisse Group AG (``CS 
Group'').\2\
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    \1\ Applicants request that any relief granted pursuant to the 
application also apply to any existing or future company of which 
CSAG is or may become an affiliated person within the meaning of 
section 2(a)(3) of the Act (together with the Applicants, the 
``Covered Persons'') with respect to any activity contemplated by 
section 9(a) of the Act.
    \2\ CS Group is a party to the application solely for purposes 
of agreeing to the portion of condition 4 that applies to it.

DATES: Filing Date: The application was accepted on EDGAR on May 19, 
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2014, with a filing date of May 20, 2014.

Hearing or Notification of Hearing: An order granting the application 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing by writing to the Commission's Secretary 
and serving Applicants with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on June 13, 2014, and should be accompanied by proof of service on 
Applicants, in the form of an affidavit, or for lawyers, a certificate 
of service. Hearing requests should state the nature of the writer's 
interest, the reason for the request, and the issues contested. Persons 
who wish to be notified of a hearing may request notification by 
writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street NE., Washington, DC 20549-1090. Applicants: c/o Credit Suisse 
Asset Management, LLC, Eleven Madison Avenue, New York, NY 10010.

FOR FURTHER INFORMATION CONTACT: Courtney S. Thornton, Senior Counsel, 
at (202) 551-6812 or Mary Kay Frech, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a temporary order and a 
summary of the application. The complete application may be obtained 
via the Commission's Web site by searching for the file number, or an 
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling (202) 551-8090.

Applicants' Representations

    1. Each of the Applicants is a direct or indirect wholly owned 
subsidiary of CS Group, the parent company of CSAG. CSAM, a limited 
liability company formed under Delaware law, is registered as an 
investment adviser under the Investment Advisers Act of 1940 
(``Advisers Act''). CSAML, a corporation formed under the laws of the 
United Kingdom, is registered as an investment adviser under the 
Advisers Act. CSHG, a corporation formed under the laws of Brazil, is 
registered as an investment adviser under the Advisers Act. CSSU, a 
limited liability company formed under Delaware law, is registered as a 
broker-dealer under the Securities Exchange Act of 1934 and as an 
investment adviser under the Advisers Act, and is registered as a 
member of the Financial Industry Regulatory Authority. CSAM, CSAML, 
CSHG, and CSSU serve either as investment adviser (as defined in 
section 2(a)(20) of the Act) to investment companies (or series 
thereof) registered under the Act (``Funds'') and employees' securities 
companies (``ESCs''), or as principal underwriter (as defined in 
section 2(a)(29) of the Act) to open-end management investment 
companies registered under the Act (``Open-End Funds'') (such 
activities, collectively, ``Fund Service Activities''). CSAG is the 
principal operating subsidiary of CS Group, which operates as a holding 
company. Both CSAG and CS Group are corporations organized under the 
laws of Switzerland; both are engaged in the private banking,

[[Page 29827]]

investment banking, and asset management businesses.
    2. On May 19, 2014, the DOJ filed a one-count criminal information 
(the ``Information'') in the District Court charging CSAG with 
conspiracy to commit tax fraud related to accounts CSAG established for 
cross-border clients in violation of Title 18, United States Code, 
Section 371. CASG has agreed to resolve the action brought by DOJ 
through a plea agreement dated May 19, 2014 (the ``Plea Agreement''). 
Under the Plea Agreement, CSAG pleaded guilty to the charge set out in 
the Information (the ``Guilty Plea''). Applicants expect that the 
District Court will enter a judgment against CSAG that will require 
remedies that are materially the same as set forth in the Plea 
Agreement. Pursuant to the Plea Agreement, CSAG agreed to comply with 
the undertakings described in the application and to pay substantial 
criminal penalties and restitution.
    3. In addition to the Plea Agreement with DOJ, on February 21, 
2014, CS Group reached a settlement with the Commission that resolved 
its investigation into the provision of unregistered broker-dealer and 
investment adviser services to U.S. clients during the time period 
between 2002-2008 (the ``Commission Settlement''). The conduct that was 
the subject of the Commission investigation related to the conduct 
charged in the Information. As part of the Commission Settlement, CS 
Group agreed to pay $196,511,014, which includes $82,170,990 in 
disgorgement, $64,340,024 in interest and a $50,000,000 penalty. CS 
Group also retained an independent consultant in connection with the 
Commission Settlement.
    4. CSAG will enter a settlement with the Board of Governors of the 
Federal Reserve System (the ``Federal Reserve'') to resolve certain 
findings by the Federal Reserve, including that the activities of CSAG 
regarding opening of foreign accounts for U.S. taxpayers, provision of 
investment services to U.S. clients, and operation of CSAG's New York 
representative office prior to 2009 lacked adequate enterprise-wide 
risk management and compliance policies and procedures sufficient to 
ensure that all of its activities comply with U.S. laws and regulations 
(the ``Federal Reserve Order'').
    5. CSAG also will enter into a consent order with the New York 
State Department of Financial Services (``DFS'') to resolve DFS's 
investigation into the Conduct, as defined below (the ``DFS Order'').
    6. Ten individuals who have been identified as having been 
responsible for the conduct underlying the Plea Agreement (including 
the conduct described in any of the exhibits to the Plea Agreement) 
(the ``Conduct'') are current employees of CSAG or a Covered Person. 
All other employees of CSAG and any Covered Person who were identified 
as having been responsible for the Conduct have either resigned or been 
terminated. Of the individuals identified as having been responsible 
for the Conduct that remain employees of CSAG or a Covered Person, all 
but one (the ``December Employee'') will be notified no later than May 
31, 2014 that their employment with CSAG or a Covered Person will be 
terminated no later than August 31, 2014.\3\
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    \3\ The employment of the December Employee will be terminated 
at the earlier of December 31, 2014 or the date that the December 
Employee's services are no longer needed by CSAG. The sole activity 
of the December Employee as an employee will be to perform 
compliance-related services in a specific area. The activity of the 
December Employee will be subject to direct supervision by senior 
legal personnel.
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    7. Additionally, beginning in 2008, CSAG commenced a remediation 
program to ensure that only U.S. clients who established compliance 
with U.S. tax laws could remain clients of CSAG. U.S. clients that 
could not demonstrate tax compliance had to terminate their 
relationship with CSAG. As part of that program, CSAG moved the 
securities business with U.S. residents into U.S.-regulated 
subsidiaries or terminated those relationships.

Applicants' Legal Analysis

    1. Section 9(a)(1) of the Act provides, in pertinent part, that a 
person may not serve or act as an investment adviser or depositor of 
any registered investment company or a principal underwriter for any 
registered open-end investment company or registered unit investment 
trust, if such person within ten years has been convicted of any felony 
or misdemeanor arising out of such person's conduct, as, among other 
things, an investment adviser, a broker or dealer, or a bank. Section 
2(a)(10) of the Act defines the term ``convicted'' to include a plea of 
guilty. Section 9(a)(3) of the Act extends the prohibitions of section 
9(a)(1) to a company any affiliated person of which has been 
disqualified under the provisions of section 9(a)(1). Section 2(a)(3) 
of the Act defines ``affiliated person'' to include, among others, any 
person directly or indirectly controlling, controlled by, or under 
common control with, the other person. Applicants state that CSAG is an 
affiliated person of each of the other Applicants within the meaning of 
section 2(a)(3). Applicants state that the Guilty Plea would result in 
a disqualification of each Applicant for ten years under section 9(a) 
of the Act because CSAG would become the subject of a conviction 
described in 9(a)(1).
    2. Section 9(c) of the Act provides that the Commission shall grant 
an application for exemption from the disqualification provisions of 
section 9(a) if it is established that these provisions, as applied to 
Applicants, are unduly or disproportionately severe or that the 
Applicants' conduct has been such as not to make it against the public 
interest or the protection of investors to grant the exemption. 
Applicants have filed an application pursuant to section 9(c) seeking 
temporary and permanent orders exempting the Applicants and other 
Covered Persons from the disqualification provisions of section 9(a) of 
the Act.
    3. Applicants believe they meet the standard for exemption 
specified in section 9(c). Applicants state that the prohibitions of 
section 9(a) as applied to them would be unduly and disproportionately 
severe and that the conduct of Applicants has been such as not to make 
it against the public interest or the protection of investors to grant 
the exemption from section 9(a).
    4. Applicants assert that the Conduct did not involve any of 
Applicants acting as an investment adviser or depositor of any Fund, 
ESC or business development company or principal underwriter for any 
Open-End Fund, unit investment trust registered under the Act, or face 
amount certificate company registered under the Act. The Conduct 
similarly did not involve any Fund, ESC or business development company 
with respect to which Applicants engaged in Fund Service Activities.\4\ 
Applicants further assert that (i) none of the current or former 
directors, officers or employees of the Applicants (other than certain 
personnel of CSAG who were not involved in any of the Applicants' Fund 
Service Activities) had involvement in the Conduct; (ii) except as 
noted above, no current or former employee of CSAG or any Covered 
Person who previously has been or who subsequently may be identified by 
CSAG or any U.S. or non-U.S. regulatory or enforcement agencies as 
having been responsible for the Conduct will be an officer, director, 
or employee of CSAM, CSAML, CSHG, CSSU, or of any other Covered Person; 
(iii) those identified

[[Page 29828]]

employees have had no, and will not have any future, involvement in the 
Covered Persons' activities in any capacity described in section 9(a) 
of the Act; and (iv) because the personnel of the Applicants (other 
than certain personnel of CSAG who were not involved in any of the 
Applicants' Fund Service Activities) did not have any involvement in 
the Conduct, shareholders of the Funds and ESCs were not affected any 
differently than if those Funds and ESCs had received services from any 
other non-affiliated investment adviser or principal underwriter.
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    \4\ CSAG does not engage, has not engaged, and will not engage 
in Fund Service Activities.
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    5. Except as discussed above, Applicants have agreed that neither 
they nor any of the other Covered Persons will employ any of the 
current or former employees of CSAG or any Covered Person who 
previously have been or who subsequently may be identified by CSAG or 
any U.S. or non-U.S. regulatory or enforcement agencies as having been 
responsible for the Conduct in any capacity without first making a 
further application to the Commission pursuant to section 9(c). 
Applicants also have agreed that each Applicant (and any Covered Person 
that acts in any capacity described in section 9(a) of the Act) will 
adopt and implement policies and procedures reasonably designed to 
ensure compliance with the terms and conditions of the order granted 
under section 9(c). In addition, CSAG has agreed to comply in all 
material respects with the material terms and conditions of the Plea 
Agreement and the material terms of the Federal Reserve Order and the 
DFS Order, and CS Group has agreed to comply in all material respects 
with the material terms and undertakings of the Commission Settlement.
    6. Applicants further represent that the inability of CSAM, CSAML, 
CSHG, and CSSU to continue providing Fund Service Activities would 
result in potential hardships for both the Funds and the ESCs and their 
shareholders. Applicants state that they will distribute written 
materials, including an offer to meet in person to discuss the 
materials, to the board of trustees of the Funds, including the 
directors who are not ``interested persons,'' as defined in section 
2(a)(19) of the Act, of such Funds, and their independent legal counsel 
as defined in rule 0-1(a)(6) under the Act, regarding the Plea 
Agreement, any impact on the Funds, and the application. The Applicants 
will provide the Funds with all information concerning the Plea 
Agreement and the application that is necessary for the Funds to 
fulfill their disclosure and other obligations under the federal 
securities laws.
    7. Applicants also state that, if CSAM, CSAML, CSHG, and CSSU were 
barred from providing Fund Service Activities to the Funds and the 
ESCs, the effect on their business and employees would be severe.
    8. Applicants state that certain of the Applicants and their 
affiliates have received exemptive orders under section 9(c), as 
described in greater detail in the application.

Applicants' Conditions

    Applicants agree that any order granted by the Commission pursuant 
to the application will be subject to the following conditions:
    1. Any temporary exemption granted pursuant to the application will 
be without prejudice to, and shall not limit the Commission's rights in 
any manner with respect to, any Commission investigation of, or 
administrative proceedings involving or against, Covered Persons, 
including, without limitation, the consideration by the Commission of a 
permanent exemption from section 9(a) of the Act requested pursuant to 
the application or the revocation or removal of any temporary 
exemptions granted under the Act in connection with the application.
    2. Except as set out in the second paragraph of Section IV.E of the 
application, neither the Applicants nor any of the other Covered 
Persons will employ any of the current or former employees of CSAG or 
any Covered Person who previously have been or who subsequently may be 
identified by CSAG or any U.S. or non-U.S. regulatory or enforcement 
agencies as having been responsible for the Conduct in any capacity 
without first making a further application to the Commission pursuant 
to section 9(c).
    3. Each Applicant and Covered Person will adopt and implement 
policies and procedures reasonably designed to ensure that they will 
comply with the terms and conditions of the requested orders within 60 
days of the date on which any permanent order is granted or, with 
respect to condition 4, such later date as may be contemplated by the 
Federal Reserve Order, the DFS Order, or the Commission Settlement, as 
applicable.
    4. CSAG will comply in all material respects with the material 
terms and conditions of the Plea Agreement and with the material terms 
of the Federal Reserve Order and the DFS Order, and CS Group will 
comply in all material respects with the material terms and 
undertakings of the Commission Settlement.
    5. Applicants will provide written notification to the Chief 
Counsel of the Commission's Division of Investment Management, with a 
copy to the Chief Counsel of the Commission's Division of Enforcement, 
of a material violation of the terms and conditions of the requested 
orders within 30 days of discovery of the material violation.

Temporary Order

    The Commission has considered the matter and finds that the 
Applicants have made the necessary showing to justify granting a 
temporary exemption.
Accordingly
    It is hereby ordered, pursuant to section 9(c) of the Act, that the 
Applicants and the other Covered Persons are granted a temporary 
exemption from the provisions of section 9(a), effective forthwith, 
solely with respect to the Guilty Plea, subject to the representations 
and conditions in the application, until the date the Commission takes 
final action on their application for a permanent order.

    By the Commission.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-11929 Filed 5-22-14; 8:45 am]
BILLING CODE 8011-01-P