* First time product maker and distributor fined
* Credit Suisse, Yorkshire say compensation won't be
(Adds Credit Suisse, Yorkshire Building Society response)
By Huw Jones
LONDON, June 16 Britain's financial conduct
watchdog handed out more than million-pound fines to Credit
Suisse and Yorkshire Building Society for
promising unrealistic returns to investors who had limited
The Financial Conduct Authority (FCA) said in a statement on
Monday that it had fined Credit Suisse International (CSI) 2.4
million pounds ($4 million) and Yorkshire Building Society (YBS)
1.4 million pounds, its second and third biggest fines for
marketing failures related to investments totalling 797 million
"These promotions were a serious breach of the requirement
to be clear, fair and not misleading," the watchdog's director
of enforcement, Tracey McDermott, said.
It was also the first time that the watchdog, launched in
April 2013 with a specific remit to protect consumers after a
string of mis-selling scandals spanning decades, has fined the
producer and distributor of a product at the same time.
Credit Suisse told customers that its Cliquet deposit
product provided capital protection and a guaranteed minimum
return, with the apparent potential for significantly more if
Britain's FTSE 100 share index performed consistently
Almost 83,800 customers invested a total of 797.4 million
pounds in the product, with YBS the distributor responsible for
approximately 75 percent of the total amount invested.
The FCA said the probability of achieving only the minimum
return was 40-50 percent, and the probability of achieving the
maximum return was close to zero percent.
"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," McDermott said.
Both firms have agreed to contact customers 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. Credit Suisse and YBS generated 19 million
pounds and 18.5 million pounds in revenue, respectively.
Credit Suisse said it accepted the FCA's findings and took
the matter very seriously, along with agreeing a comprehensive
redress process. YBS said it fully accepted the FCA's decision
and apologised to its customers, adding that on this occasion it
fell short of its own high standards.
Regulators are becoming increasingly worried about the
impact of fines on banks for misconduct generally, but the Swiss
bank said it did not expect the compensation bill to be
material. YBS said its contribution would not affect the
mutual's financial strength.
After concerns were raised by Britain's consumer group
Which? and others in September 2010, Yorkshire Building Society
changed its promotional literature but continued to give an
unfair impression of the likelihood of achieving maximum
returns, the FCA said.
Credit Suisse also reviewed its literature but decided not
to change the brochure significantly.
Both firms obtained a 30 percent discount on their fines
after agreeing to settle with the FCA at an early stage.
($1 = 0.5956 British pounds)
(Editing by Chris Vellacott/Louise Heavens/Susan Fenton)