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Credit Suisse Fined Over Marketing of Investment Product

FCA Head of Enforcement Tracey McDermott
FCA’s head of enforcement Tracey McDermott said, Credit Suisse and Yorkshire Building Society “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.” Photographer: Richard Gleed/Financial Conduct Authority via Bloomberg

June 16 (Bloomberg) -- A unit of Credit Suisse Group AG was fined by the U.K. markets regulator for promoting a product that garnered 797 million pounds ($1.35 billion) in investments and had about a zero percent chance of reaching its maximum return.

The Financial Conduct Authority fined the Zurich-based bank 2.4 million pounds, the regulator said in a statement today. Yorkshire Building Society, which sold about 75 percent of the total amount invested in Credit Suisse’s Cliquet product, was told to pay 1.4 million pounds.

The firms must also contact customers who bought the product from November 2009 to June 2012 and give them the chance to exit it, without penalty or interest, the FCA said. Some 83,777 typically “unsophisticated” investors, bought the savings product that was marketed as having a guaranteed minimum return and the potential for “significantly more,” according to the regulator. The probability of only achieving the guaranteed minimum return was 40 to 50 percent and close to zero percent for the maximum, it said.

“We accept the findings of the FCA’s final notice,” Credit Suisse, Switzerland’s second-largest lender, said in a statement. “We have taken this matter very seriously, have fully co-operated with the FCA’s investigation and have agreed a comprehensive redress process.”

In a separate investigation, Credit Suisse’s main bank subsidiary pleaded guilty in the U.S. last month and was penalized $2.6 billion for helping Americans evade taxes. The settlement resolved the last major litigation issue for the Swiss bank, Chief Executive Officer Brady Dougan said at the time.

Credit Suisse and Yorkshire Building Society “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,” Tracey McDermott, the FCA’s head of enforcement, said in the statement. “This was unacceptable.”

Yorkshire Building Society, Britain’s second-largest customer-owned lender with about 3.5 million members, apologized to customers.

“We are committed to doing all we can to put this right as soon as possible and ensure a fair outcome for customers,” the Bradford, England-based company said in a statement.

To contact the reporters on this story: Lindsay Fortado in London at lfortado@bloomberg.net; Richard Partington in London at rpartington@bloomberg.net

To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net Jon Menon, Edward Evans

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