Commercial Law International

By: Ainsley Brown

Credit Suisse has agreed to settle allegations of insider trading in Brazil for R$19.2 million. The fine is the second largest, after the Banco Safra case of 2007, levied on a company by the Securities and Exchange Commission of Brazil – Commissão de Valores Mobiliários (CVM).

The offer to settle is substantially more than Credit Suisse’s original offer of R$150,000 last year rejected by CVM. The new offer, which was promptly accepted by CVM, is much closer to the values of the alleged illegal trades and better reflects the magnitude of the offence, according to the Financial Times. Well, that’s one way of putting it. I would have simply said that Credit Suisse got caught with its hand in the cookie jar – allegedly – and is simply paying the consequences.

The settlement stems from alleged insider deal of shares in Embraer, the Brazilian aircraft manufacturer between October 2005 and January 2006. At the time Embraer was preparing to undergo capital restructuring with its shares then being traded on the São Paulo Stock Exchange’s Novo Mercado section. By listing on the Novo Mercado a company voluntarily binds itself to higher corporate governance and transparency standards than that required by either Brazilian law or by the CVM. These features have proven to be very attractive to many investors both domestic and foreign.

According to the CVM, Sistel, a pension fund for employees of telecommunications companies and a controlling shareholder of Embraer commissioned Credit Suisse to analyze the capital restructuring plans. However, not long after it was engaged Credit Suisse, it is alleged, began buying shares of Embraer.

The positive news for Credit Suisse is that the settlement as now drawn a line under this issue and it can now move on to doing what it does best – connecting those with money with those in need of it.

By: Ainsley Brown

Switzerland´s second largest bank, Credit Suisse, in a sign of generosity – oh sorry, let me re-phrase that – in a sign of commercial awareness and good customer relations, has decided to compensate clients who suffered losses as a result of the collapse of Lehman Brothers. It is the first investment bank to put forward such a comprehensive compensation package in connection with clients who bought Lehman products. This move will no doubt put pressure on UBS, Switzerland´s largest bank, and other investments banks to follow suit.

This new proposal is the second compensation payout in connection with Lehman so called capital protected products that Credit Suisse has undertaken. The first of these was done not long after Lehman filed for Chapter 11 bankruptcy in the US and administration in both the UK and in Europe. With this new development Credit Suisse has offered to compensate 3,700 clients to the tune of approximately SwFr 150 million.

But there´s a catch – isn’t there always. Firstly, it is not automatic compensation, no no, this is an offer for compensation. What is the difference? The difference being such an offer can always be rejected  by the client, who  could then presumably take recourse in the courts in order to protect/enforce their rights to just compensation. Also, being an offer Credit Suisse could always within a reasonable time withdraw it. Here again, presumably the client would have recourse to the courts, in either case neither Credit Suisse nor its clients (individually or collectively) would look forward to such a prospect. All would have to guard against delays, cost and reputational damage at a time when neither can afford the specter of a public trial.

Secondly, if accepted by clients it is not for 100% compensation – this would indeed be a sign of generosity if it were. Instead, clients would receive between 50% and 70% of the nominal value of their investments. Thirdly, in order to be eligible for this latest round of compensation the client must have up to SwFr500, 000 invested with Credit Suisse at the end of August, more than of a fifth of which must have been invested in 100% capital protected Lehman products.

I believe most if not all clients will accept this offer, laughing all the way to the bank as they do.