The Financial Conduct Authority has handed out penalties of £2,398,100 to CSI and £1,429,000 to YBS.
It said the firms had failed to "ensure financial promotions for CSI's Cliquet Product were clear, fair and not misleading".
Both firms agreed to settle at an early stage of the FCA's investigation and therefore received a 30% settlement discount.
Today's fines were the first time that the FCA has taken action against both the manufacturer of a product and its distributor simultaneously.
The Cliquet Product was designed by CSI to provide capital protection and a guaranteed minimum return with the apparent potential for significantly more if the FTSE 100 performed consistently well.
The regulator said that the probability of achieving only the minimum return was 40-50% and the probability of achieving the maximum return was close to 0%.
Despite this CSI's and YBS's financial promotions marketed the potential maximum return on the product as a key promotional feature.

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The FCA said in a statement: "The target market for the Cliquet Product was described by CSI as "stepping stone customers" who were conservative and risk averse.
"The product was typically sold to unsophisticated investors with limited investment experience and knowledge through a number of distributors. 83,777 customers invested a total of £797,380,716 in the product; with YBS being the distributor responsible for approximately 75% of the total amount invested.
"The maximum return figure was given undue prominence in both CSI's product brochures for the Cliquet Product, which YBS approved and provided to their clients, and in YBS's own financial promotions for the product, some of which also did not clearly explain how returns were calculated."
Tracey McDermott, FCA's director of enforcement and financial crime, said: "It is crucial that firms consider the needs of their customers from the time that products are being designed through to their marketing and sale.
"The information provided to customers forms an important part of this.
"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."