The fines centred on a product called Cliquet designed by Credit Suisse International (CSI) and sold to nearly 84,000 customers who ploughed in £797 million.
It was aimed at “unsophisticated investors with limited investment experience” through distributors such as Bradford-based Yorkshire Building Society (YBS). The product offered a guaranteed minimum return plus the apparent potential for significantly more if the FTSE 100 performed well.
Regulators at the Financial Conduct Authority said the probability of achieving only the minimum return was 40-50 per cent but there was almost no chance of the maximum return being achieved.
The FCA said the maximum return figure was given “undue prominence” in both CSI’s product brochures, which YBS approved and provided to clients, and in YBS’s own financial promotions.
YBS was fined £1.4 million and CSI £2.4 million. The building society, the second largest in the UK, saw 56,000 customers invest nearly £546 million.
Tracey McDermott, of the FCA, said: “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.”
YBS said affected customers will be given the option to exit their account and receive an “appropriate rate of interest”.
Jeremy Summers, of law firm Slater & Gordon, said: “While the fine is not in itself large by FCA standards it does reflect the FCA’s desire to show a credible deterrent which will be welcomed by the public.”
Richard Lloyd, of consumer group Which? said: “We raised concerns about these products to the regulator in 2010, after finding companies recklessly promoting maximum returns that had never been achieved in the FTSE 100’s history.
“It’s good to see the FCA sending a clear message with these fines and it must now investigate all building societies that sold these products.”