watchdog fines Credit Suisse, Yorkshire Building Society
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[June 16, 2014] By
LONDON (Reuters) -
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 market knowledge.
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 pounds.
"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 well.
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,"
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.
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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)
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