The FCA has fined Credit Suisse International and Yorkshire Building Society a total of £3.8m for financial promotions failings.
Credit Suisse has been fined £2.4m and Yorkshire £1.4m for sending out misleading product promotions that emphasised potential returns they knew were almost impossible to achieve.
The FCA says the firms failed to ensure promotions for Credit Suisse’s Cliquet structured product were clear, fair and not misleading.
It is the first time the regulator has taken action against both the manufacturer and distributor of a product simultaneously.
The product offered a guaranteed minimum return with the apparent potential for significantly more if the FTSE 100 index performed consistently well.
Potential maximum returns of up to 72 per cent were emphasised in promotional materials – despite Credit Suisse and Yorkshire Building Society knowing the probability of achieving the maximum return was “close to 0 per cent”.
The FCA says the failings were particularly serious as the product was typically bought by unsophisticated investors and sold on a non-advised basis.
Some 84,000 customers invested a total of £797.4m in the product. Yorkshire Building Society was the main distributor, responsible for 75 per cent of the amount invested.
FCA director of enforcement and financial crime Tracey McDermott says: “Credit Suisse and Yorkshire Building Society let their customers down badly.
“They knew the chances of receiving the maximum return were close to zero but they nevertheless highlighted this as a key promotional feature of the product. This was unacceptable.”
The FCA found that product brochures issued by Credit Suisse did not provide a clear enough explan-ation of early exit fees and explanations on Yorkshire Building Society posters and flyers of how returns were calculated were “unclear”.
Independent compliance consultant Adam Samuel says: “Neither Credit Suisse nor Yorkshire Building Society seems to have had a clear idea of how the product worked.
“A clear, fair and not misleading promotion cannot be produced by a firm that does not understand the product.”
A spokeswoman for Yorkshire Building Society says: “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. We are committed to doing all we can to put this right as soon as possible.”
A Credit Suisse spokeswoman says: “We accept the findings of the FCA’s final notice. We have agreed a comprehensive redress process under which affected retail customers will be eligible to claim compensation.”