The Financial Services Authority (FSA) issued the fine in connection with sales of the fund between 3 December 2003 and 15 September 2008.
Coutts, a banking unit owned by the Royal Bank of Scotland (RBS), agreed to conduct a business review of its past activity and provide compensation to all customers who lost money as part of the sale.
The FSA investigation found that many of the AIG fund investors were informed that it could be seen as an alternative to a bank or building society - however, the positions they were assuming couild have been riskier than originally thought.
Coutts was found to have failed to take into account the changing market conditions in 2008 and did not train fund advisors to offer an accurate explanation of the risks surrounding the product.
Tracey McDermott, acting director of enforcement and financial crime, said: âFirms giving investment advice must ensure they make suitable recommendations. It is imperative that firms also ensure that clients understand the nature of the product they are buying and the risks it involves.â
Coutts agreed to settle at an early stage in the investigation, which means it earned a 30 per cent discount on the fine.
By Jim Ottewill