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Credit Suisse dropped SEC waiver request amid opposition -sources

WASHINGTON (Reuters) РCredit Suisse has quietly withdrawn a request for a waiver to raise capital more easily, after U.S. Securities and Exchange Commission staffers told the bank in recent weeks it would not win approval, people familiar with the matter told Reuters.

The bank had applied for the waiver following its agreement last year to pay $2.5 billion to resolve criminal charges that it helped wealthy Americans evade U.S taxes.

The criminal charges automatically triggered a federal law that deprives the bank for three years of the privilege of being known in the market as a “well-known seasoned issuer,” or WKSI.

The designation lets public companies bypass SEC approval and raise capital “off the shelf” – a process that is speedier and more convenient.

Failing to obtain the waiver will make it more costly and burdensome for Credit Suisse to sell shares and debt to the public.

A spokesman for the bank declined to comment.

This marks at least the fourth time in recent years that Credit Suisse has sought various waivers from the SEC.

The bank was previously granted two waivers in connection with its May 2014 guilty plea that permit it to continue acting as an investment adviser and to raise capital privately.

In 2012, it won approval for a WKSI waiver after it settled civil charges by the SEC that it misled investors in mortgage-backed securities.

Granting waivers to big banks that break the law has become a flash point at the SEC, where Commissioner Kara Stein, a Democrat, in particular has openly criticized the agency for rubber stamping banks’ requests.

She and Luis Aguilar, another Democratic commissioner, have said they fear that by granting waivers so often, the SEC will not deter banks from breaking the law again.

On Monday, Stein issued another dissent – this time on a WKSI waiver granted to Deutsche Bank over its guilty plea to manipulating the Libor interest rate benchmark.

The SEC does not keep formal records on when banks are denied waivers. Only waivers that are granted are made public.

In most cases, lawyers for the banks will confidentially request feedback from the SEC staff on whether an application stands a chance.

If the staff tells them an application will not get approved, the banks typically withdraws it.

In the past, many waivers were granted by the SEC’s staff, but today most are voted on by the full five-member commission after Stein and Aguilar began requesting recorded votes.

SEC Chair Mary Jo White recently provided limited statistics on waiver approvals, saying in a March speech that at least four WKSI waivers had been denied since the agency started tracking it in January 2014. In that same time period, seven were granted, she said.

The precise reasons of why the SEC took the somewhat unusual step of denying Credit Suisse’s request were not immediately clear.

One issue that came to light during the SEC’s review of its application centered on an error the bank made in its March annual report.

In that report, the bank erroneously stated its status as a well-known seasoned issuer, when in fact the SEC had not granted the bank a waiver.

The bank had previously disclosed it was not a WKSI before it made the mistake, and it corrected the error in a filing the next day.

Credit Suisse’s mistake on its 20F form was discussed internally at the SEC, with some staffers raising questions about whether the bank had adequate controls in place over its financial disclosures, according to people familiar with the matter.

In the end, though, several people familiar with the matter said it was not a factor considered by the SEC.

The bank is also separately still hoping to win approval for another exemption from the Department of Labor following its 2014 criminal plea.

In January, the Labor Department held an unusual public hearing to decide whether the bank should be allowed to continue managing retirement plans. The department is still reviewing the application.

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