The Financial Industry Regulatory Authority (FINRA) said Monday it was fining the American brokerage unit of Swiss banking giant Credit Suisse $1.75 million for violating rules regarding the controversial market-making practice known as "naked" short-selling.

Credit Suisse Securities (USA) LLC was being fined for violating Regulation SHO, a rule enacted in early 2005 by the Securities Exchange Commission to target prevent market participants from abusing short-selling, according to a statement from the regulatory group,

In a short sale, a market maker sells a security it does not own, later borrowing the instrument from a third-party in order to make good on its transaction. If the price of that security goes down, the short-seller can later buy it back in the open market, returning it to the party from which it borrowed in the first place, and pocketing the difference in prices as profit.

In Credit Suise's case, the FINRA statement noted, the broker "entered millions of short sale orders without reasonable grounds to believe that the securities could be borrowed," which resulted in an elevated number of cases where Credit Suisse executed a securities short-sale but then suffered a "failure to deliver" the borrowed securities. The violations noted occurred between June 2006 and December 2010.

"Credit Suisse's Reg SHO supervisory and compliance monitoring system was seriously flawed. Millions of short sale orders were being entered in its systems without locates for over four years because the firm did not have adequate Reg SHO technology and procedures in place," Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said in the statement.

Credit Suisse neither admitted nor denied the charges in the settlement, according to the statement.