Release Date: 16th June 2014
To access the original FCA document, click here.
Summary
The Financial Conduct Authority (FCA) has fined Credit Suisse International (CSI) and Yorkshire Building Society (YBS) for breaches in financial promotions related to CSI’s Cliquet Product. CSI faced a penalty of £2,398,100, and YBS was fined £1,429,000 for their failure to ensure that their promotional materials were clear, fair, and not misleading.
The Cliquet Product, structured to provide capital protection and a guaranteed minimum return, misleadingly highlighted the possibility of significantly higher returns based on the FTSE 100’s performance. This was despite the very slim chance (nearly zero) of achieving the maximum return, which was misleadingly marketed as a key feature. The product was aimed at conservative, risk-averse “stepping stone customers” — predominantly unsophisticated investors with limited financial knowledge. Ultimately, 83,777 customers invested a total of £797,380,716, with YBS distributing about 75% of this volume.
Both Credit Suisse and YBS gave excessive prominence to the maximum potential return in their promotional materials without adequately explaining the calculation of returns or clarifying the low probability of achieving the maximum outcome. This practice continued even after initial criticisms from third parties, including consumer advocacy group Which?, led YBS to modify its promotions slightly in 2010. However, the impression of the likelihood of achieving the maximum return remained unfairly skewed.
The FCA’s investigation uncovered that CSI had not implemented procedures for regular comprehensive reviews of longstanding promotions, which might have addressed misleading information earlier. Both companies opted to settle early in the FCA’s investigation, qualifying for a 30% discount on their fines.
This case represents the first instance in which the FCA has simultaneously taken action against both a product’s manufacturer and its distributor over failures in financial promotions. For other firms in the industry, this scenario underscores the critical importance of ensuring all promotional materials are accurate, transparent, and aligned with consumer protection standards. Firms must regularly review their financial promotions to prevent misleading customers about product features, particularly concerning the realistic probabilities of investment returns. This case highlights the need for a rigorous compliance framework to maintain the integrity of financial promotions and safeguard consumer interests.
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