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https://uk.news.yahoo.com/firms-fined-over-misleading-product-144035347.html#vddHLqP Yorkshire Building Society and Credit Suisse have been fined a total of £3.8 million for misleading inexperienced customers over investments that had almost zero chance of achieving maximum returns. 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 Yorkshire Building Society (YBS). YBS was responsible for three-quarters of the total invested, the Financial Conduct Authority (FCA) said. The product offered a guaranteed minimum return plus the apparent potential for significantly more if the FTSE 100 performed well. Regulators said the probability of achieving only the minimum return was 40-50% 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 saw 56,000 customers invest nearly £546 million. Almost 90% were aged 45 and over, with nearly a third of investors over 65. 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 CSI and YBS let their customers down badly. "These promotions were a serious breach of the requirement to be clear, fair and not misleading. "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." The FCA said that in September 2010, following concerns raised by third parties including Which?, YBS had changed its promotions so that undue prominence was no longer given to the maximum return. But it said that the lender continued to cite the potential for the return, giving an unfair impression of the likelihood of achieving it, the regulator said. CSI also reviewed its promotions but decided not to make significant changes to its product brochure. The FCA said both firms would have faced higher fines but agreed to settle at an early stage of the FCA's investigation. They have each agreed to contact customers who bought the Cliquet product available between November 1 2009 and June 17 2012. YBS revenues from the product during the period totalled £18.6 million. For CSI the figure was £19 million.
Barclays has gone to shareholders to raise £5.8bn after the bank revealed it faced a capital shortfall of £12.8bn to hit a new Bank of England-imposed safety buffer. In a statement this morning, the bank said it would launch a deeply discounted rights issue to help close the gap between its current so-called leverage ratio and the one being imposed on British banks by regulators. The announcement came as Barclays unveiled its results for the first half of the year, which revealed larger than expected provisions against the cost of compensating customers mis-sold payment protection insurance and interest rate hedging products. The bank set aside £1.35bn against further PPI claims, taking its total compensation fund to just under £4bn, and a further £650m for interest rate swap redress, increasing its provision to £1.5bn Barclays' statutory pre-tax profits for the first six months of 2103 increased by £806m yearon-year to £1.67bn, while its adjusted profits, which strip out the mis-selling provisions, as well as changes in the value of the lender's own debt, fell by 17pc to £3.6bn. The rights issue will allow existing investors to buy one new share for every four they currently own at a price of 185p, a discount of 40pc to they bank's closing share price yesterday. Antony Jenkins, chief executive of Barclays, said the bank had taken the decision to raise they money after "careful consideration of the options". "The Board and I are aware of the implications of a rights issue for shareholders. We hope to balance this with reduced uncertainty in the outlook for Barclays and with enhancement of our dividend payout from 2014," said Mr Jenkins. More: http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/10210317/Barclays-calls-on-investors-for-5.8bn-to-help-fill-12.8bn-capital-hole.html
US investment bank Citigroup is to pay $730m (£484m) to settle a class-action suit by bondholders brought over the financial crisis. The suit alleged Citi misled buyers of its bonds over its exposure to subprime mortgages and other high-risk securities between 2006 and 2008. Citi denied the claims, but said it agreed to the settlement to "eliminate uncertainties". In August 2012, Citi struck a $590m settlement with shareholders. Bondholders claimed that Citi not only misrepresented its exposure to mortgage-backed assets, but also understated losses on loans. But the bank said in a statement: "Citigroup senies the allegations and is entering into this settlement solely to eliminate the uncertainties, burden and expense of further protracted litigation. "This settlement is another significant step toward resolving our exposure to claims arising from the financial crisis, and we look forward to putting this matter behind us. Citi is a fundamentally different company today than at the beginning of the financial crisis." The settlement must be approved by the US district court. In August 2012, Citi announced a $590m settlement with investors who claimed that the company had hid its exposure to the collateralised debt obligations market to prop up its share price. The investors suffered heavy losses when Citi's shares eventually fell. In that case, Citi also denied the allegations and said it was settling to avoid any more legal costs. Link: http://www.bbc.co.uk/news/business-21839793