The City watchdog has fined Credit Suisse International (CSI) and Yorkshire Building Society (YBS) £3.8 million for “unacceptable” failings in marketing a product that raked in almost £800m from “unsophisticated” investors.
The Financial Conduct Authority (FCA) said CSI’s Cliquet product, sold through YBS and its Barnsley and Chelsea brands, was designed to deliver a guaranteed minimum return, with the “apparent potential for significantly more if the FTSE 100 performed consistently well”.
Although the chance of achieving the maximum return was “close to zero”, the regulator said the two firms highlighted the possible gains as a “key promotional feature”.
Marking the first time that the FCA has acted against a product manufacturer and distributor simultaneously, CSI was fined £2.4m and YBS received a penalty of £1.4m.
Cliquet was typically sold to investors with limited knowledge of the markets. Almost 84,000 customers invested more than £797m, with YBS responsible for about 75 per cent of the total. Both firms have agreed to contact those who bought the product between November 2009 and June 2012 to offer the chance of exiting it without penalty and, where applicable, receive an interest payment.
Tracey McDermott, the FCA’s director of enforcement and financial crime, said: “CSI and YBS knew that 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.”