Yorkshire Building Society and Credit Suisse fined over bonds

The Financial Conduct Authority (FCA) has fined Yorkshire Building Society and Credit Sussie for £1.4m and £2.3m respectively, for failing to ensure financial promotions were clear, fair and not misleading on a market-related bond.

The fine relates to the Cliquet product, which was designed by Credit Suisse to provide capital protection and a guaranteed minimum return that was linked to the stock market. However, the probability of achieving only the minimum return was 40-50%, whilst the probability of achieved the maximum was close to 0%.

Despite this, both firms’ promotions market the potential maximum return on the product as a key promotional feature. Over 83,000 customers invested a total £797m in the product, with Yorkshire Building Society being the distributor responsible for around 75% of the total amount.

Tracey McDermott, the FCA’s director of enforcement and financial crime, said, “Financial promotions are often the primary source of information for consumers and in this case [the firms] let their customers down badly. These promotions were a serious breach of the requirement to be clear, fair and not misleading.”

The product was typically sold to unsophisticated investors with limited investment experience and knowledge.

Hilary McVitty, head of external affairs at the Building Societies Association (BSA), said that no firm can be immune from making the occasional mistake, but how the firm deals with the issues and puts it right for customers “makes a big difference”.

Yorkshire Building Society commented that it fully accepts the decision made by the FCA, adding that on this occasion it has fallen short of its own high standards of “putting our customers at the heart of everything we do”.

The society added, “We are committed to doing all we can to put this right as soon as possible and ensure a fair outcome for customers.

“As a mutual organisation owned by our members, it is really important to us to work in our customers’ interests and maintain their trust. We hope our actions in dealing with this issue will reflect our commitment to doing the right thing for our customers and treating them in a fair way, something which lies at the heart of the Society’s values.”

Affected customers will now be given the option of exiting their account and receiving an appropriate rate of interest or retaining their account until maturity.

Robin Fieth, chief executive of the BSA, said, “Customers and customer outcomes are at the heart of our members businesses, but occasionally any firm can get something wrong. Putting it right to ensure a fair outcome for affected consumers is then critical and this is what is now happening in relation to the Cliquet products.”

Photo: Yorkshire Building Society  

Further reading:

The demise of the mutual sector? We don’t think so

FCA: changing culture at financial services firms won’t be a quick job

Ombudsman service reveals ‘unprecedented’ year of financial disputes

Regulator FCA condemns ‘disorderly’ pensions and annuities

The Guide to Sustainable Banking 2013