FCA Fines Credit Suisse, Yorkshire Building Society For Financial Promotions Failings

Stephen Little

17 June 2014

The Financial Conduct Authority has fined Credit Suisse International and Yorkshire Building Society £3.8 million for the misleading promotion of a structured product.

The regulator said in a statement that both companies had failed to ensure that financial promotions for CSI’s Cliquet Product were “clear, fair and not misleading.”

Credit Suisse was fined £2.4 million, while Yorkshire Building Society was handed a fine of £1.4 million.

The Cliquet Product was designed by Credit Suisse and offered a guaranteed minimum return with the apparent potential for significantly more if the FTSE 100 performed consistently well. However the real probability of achieving only the minimum return was between 40 to 50 per cent.

According to the FCA both firms had highlighted potential maximum return on the product as a key feature, when in fact the probability of achieving a maximum return was close to zero per cent.

The product was typically sold to unsophisticated investors with limited investment experience, the FCA said.

“It is crucial that firms consider the needs of their customers from the time that products are being designed through to their marketing and sale. The information provided to customers forms an important part of this. Financial promotions are often the primary source of information for consumers and in this case CSI and YBS let their customers down badly. These promotions were a serious breach of the requirement to be clear, fair and not misleading,” said Tracey McDermott, FCA’s director of enforcement and financial crime.

In total, 83,777 customers invested £797,380,716 in the product; with YBS being the distributor responsible for approximately 75 per cent of the total amount invested.

Credit Suisse said in a statement that it had accepted the findings of the FCA.

“We have taken this matter very seriously, have fully co-operated with the FCA’s investigation and have agreed a comprehensive redress process under which affected retail customers will be eligible to claim compensation,” the bank said.

Yorkshire Building Society Group said that it also accepted the decision made by the FCA and apologised to its customers.

“On this occasion we have fallen short of our own high standards, and of putting our customers at the heart of everything we do. We have agreed with the FCA a process under which our affected customers, will be given the option to exit their account and receive an appropriate rate of interest, or to retain their account until maturity,” Yorkshire Building Society said in a statement.