WASHINGTON, DC (January 5, 2018) — U.S. Market Advisors Law Group PLLC announces that a securities class action has been filed against Credit Suisse Group AG (NYSE:CS). The class action is on behalf of investors who acquired Credit Suisse ADRs between March 20, 2015 and February 3, 2016.
Investors with losses have until February 20, 2018 to ask the Court to appoint you as Lead Plaintiff for the class. The Lead Plaintiff is a representative for absent members of the class. Investors do not need to seek appointment as Lead Plaintiff to share in any class recovery in this action. If you are a class member and there is a recovery for the class, you can share in that recovery as an absent class member. You may retain counsel of your choice to represent you in this action. Contact USMA Law Group to discuss this action.
Credit Suisse is a Swiss multinational financial services holding company, with one of its four primary divisions focused on investment banking.
Allegations Against Credit Suisse
The complaint alleges that Defendants repeatedly touted in SEC filings that Credit Suisse maintained “comprehensive risk management processes and sophisticated control systems” governing its investment operations. A notable component of the Bank’s risk management structure was its high-level Capital Allocation and Risk Management Committee (“CARMC”), which was responsible for, among other obligations, establishing and allocating appropriate trading and risk limits for the Bank’s various businesses. Significantly, Credit Suisse represented in its Class Period filings that the trading and risk limits set by the CARMC were “binding” on the Bank’s businesses and trading desks. In addition, only senior management had the authority to temporarily increase a divisional risk committee limit and, even in those cases, such authority was limited to an “approved percentage for a period not to exceed 90 days.”
Contrary to Defendants’ representations, however, Credit Suisse’s trading and risk limits were not actually binding, and were routinely increased to allow the Bank to accumulate billions of dollars in extremely risky, highly illiquid investments. Indeed, Defendants’ scheme enabled the Bank to surreptitiously accumulate nearly $3 billion in distressed debt and U.S. collateralized loan obligations (“CLOs”), which were notoriously difficult to liquidate and required significant capital investments. This outsized investment position—which was undisclosed to shareholders—violated Credit Suisse’s purported risk protocols and rendered the Bank highly susceptible to losses when credit markets contracted.
By the beginning of 2016, with credit markets tightening, Defendants could no longer hide the truth. On February 4, 2016, Credit Suisse announced its Fourth Quarter and Full Year 2015 financial results, which included a massive $633 million write-down from the sale of the Bank’s outsized, illiquid distressed debt and CLO positions—an incredible loss that would swell to nearly $1 billion in the ensuing weeks. Even worse, Defendant Tidjane Thiam, Credit Suisse’s recently-appointed CEO, explicitly admitted that these risky and outsized investments were only allowed because trading limits were continuously raised, which enabled traders take larger and larger positions in violation of the Bank’s publicly-touted risk policies. In addition, Thiam acknowledged that Credit Suisse’s investment bank had acquired these securities over the years as it was “trying to generate revenue at all costs.”
The market reacted in astonishment. Analysts and former Credit Suisse insiders were incredulous that the position went unreported, responding with disbelief at the notion that Credit Suisse’s senior executives did not know about the outsized illiquid positions sooner. Credit Suisse bankers said it was “inconceivable” that the CARMC was unaware of the holdings. A former Credit Suisse subsidiary board member remarked: “If the CFO didn’t know about it, then sure as hell the chief risk officer would have, which means everybody would have . . . It’s hard to imagine that nobody knew about this stuff.” In assigning an uncertainty rating to Credit Suisse’s securities, a Morningstar report notably explained: “We’re more worried by Thiam’s admission that the bank held large illiquid position that he and other top managers did not know about in October.”
In the wake of Credit Suisse’s revelations, the price of the Bank’s ADRs declined from a close of $16.69 on February 3, 2016 to a close of $14.89 on February 4, 2016—an 11% drop that wiped out approximately $230 million in market capitalization.
About USMA Law Group
U.S. Market Advisors Law Group PLLC is a national law firm based in Washington, D.C. The firm represents investors worldwide in U.S. securities class action lawsuits.
David P. Abel