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The adverts that triggered Credit Suisse and Yorkshire’s multi-million pound fines

Credit Suisse International and Yorkshire Building Society sent out misleading product promotions that emphasised potential returns they knew were almost impossible to achieve, an FCA investigation has found.

The FCA has today fined Credit Suisse and Yorkshire Building Society a total of £3.8m for failing to ensure promotions for Credit Suisse’s Cliquet structured product were clear, fair and not misleading.

The product offered a guaranteed minimum return with the apparent potential for significantly more if the FTSE 100 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 that the probability of achieving the maximum return was “close to 0 per cent”, in other words, extremely unlikely.

The FCA says the failings were particularly serious as the product was typically bought by unsophisticated investors with limited investment experience and knowledge, and the product was sold on a non-advised basis.

From its own analysis, which it shared with Yorkshire Building Society, Credit Suisse knew there was a 40 to 50 per cent chance of a customer only receiving the guaranteed minimum return.

Product brochures issued by Credit Suisse gave the potential maximum return equal or close to equal prominence to the minimum return, including on the front page:

Credit_Suisse_brochure
An extract from the front page of a Credit Suisse brochure for the product

The brochure did include the conditions required to obtain the maximum return, but relied on investors to infer the likelihood of returns from this.

The FCA says this would require a high level of sophistication from potential investors which, given the target market, they were unlikely to possess.

Yorkshire Building Society also issued its own promotions relating to the Cliquet product, including flyers, branch posters, direct mail letters and web pages.

The FCA says the explanations on posters and flyers of how returns were calculated were “unclear”. It says they gave rise to the risk that typical investors would confuse the structure (which generated returns through a series of six-month options over the lifetime of the product based on the FTSE 100), with a simple index tracker.

In its branch posters, the building society highlighted both the minimum and maximum returns in bold fonts and colours, and significantly larger font size than anything else on the page.

The posters did not contain any explanation at all of the conditions necessary to achieve the maximum return:

Yorkshire_Building_Society_poster
An extract from a Yorkshire Building Society poster for the tranche of the product which opened in November 2009

In its flyers, the Yorkshire Building Society also gave significant prominence to both the minimum and maximum returns:

Yorkshire_flyer
An extract from the front page of a Yorkshire Building Society flyer for the tranche of the product which launched in November 2009

A spokeswoman for Yorkshire Building Society says: “We fully accept the decision made by the FCA and we apologise to our 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. We are committed to doing all we can to put this right as soon as possible.”

A spokeswoman for Credit Suisse says: “We accept the findings of the FCA’s final notice. 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.”

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