Financial Promotions – FCA Issues Warnings

2 December 2013 Steve BaileyCompliance

The FCA is stepping up its scrutiny on financial promotions by actively monitoring promotions and issuing warnings to firms that breach the rules.

The main issues of concern are:

The excessive use of investment jargon (which could confuse the consumer);
Font sizes for warning statements being too small and difficult to read;
The risk posed by a product or service that placed a client’s capital at risk, not being made abundantly clear;
Promotions which incorrectly gave a yield figure that did not give a balanced impression of both the short and long term prospects for the investment;
When promotional advertisements describe a product or service as being ‘guaranteed’, ‘protected’ or ‘secure’ without any further confirmation or explanation.

The FCA is most concerned about promotions that highlight the potential returns without giving as much prominence to the risks of the investment.

Don’t forget to check Our View about this article and the Actions Required By You

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

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Our View

There is an expectation that the regulator will be ever more proactive in policing the financial promotion rules.

Remember, the definition of a financial promotion is “an invitation or inducement to engage in investment activity that is communicated in the course of business” and hence it is not restricted to traditional advertisements but can include any communication to more than one person (e.g. block fund switch recommendations or an ISA direct offer campaign), radio broadcasts, websites or any other activity that promotes an investment and gives the opportunity for the client to take part.

Action Required By You

The financial promotions rules can be complicated so please ensure you understand the rules. ATEB clients should discuss all promotions with their consultant.