The FSA has fined Royal Bank of Scotland's
The FSA said on Tuesday Coutts has also agreed to carry out a business review overseen by an independent third party and will compensate customers who have lost out as a result of the failings.
Coutts generally informed customers the AIG Enhanced Variable Rate Fund should be regarded as an alternative to a deposit account, exposing some to more capital risk than they were willing to accept, the FSA said.
Coutts also failed to respond appropriately to the financial turmoil following the credit crunch in 2007 and 2008 when investment risk was heightened, the regulator added.
Despite having been aware of these issues affecting the Fund, Coutts failed to make the necessary changes to the way in which it sold the Fund, the FSA said.
In a later statement on Tuesday, Coutts said it accepts the findings.
(Reporting by Chris Vellacott, editing by Sinead Cruise)