Santander fined 17 million euros over sale of convertible securities

The National Securities Commission (CNMV) has fined Banco Santander 16.9 million euros for two infractions committed in the sale of securities in 2007.

Santander sold 7 billion euros’ worth of the securities, “Valores Santander,” a form of convertible bond obligatorily convertible into shares in the bank. About half of the customers who bought the securities ended up losing up to 55 percent of the value of their investment when converted into shares, without factoring in what they received in interest payments.

The CNMV fined the bank 10 million euros for what was ruled to be a serious infraction consisting of failing to provide clients with adequate information about the product. The fine was initially announced in July 2012 but confirmed in the official gazette (BOE) on Monday. The watchdog imposed another fine of 6.9 million euros for failing to adequately manage a conflict between the bank’s own interests and those of its clients.

Santander plans to appeal the fines in court. The CNMV itself approved the sale of the securities at the time and a number of courts have upheld the validity of the product.

The securities offered an annual interest rate of 7.3 percent in the first year and thereafter the prevailing Euribor rate plus 2.75 percentage points until their maturity in October 2012. The conversion price for the bonds was well above the current price of Santander’s shares at the time of the conversion.