Financial promotions must be clear, fair and not misleading. Which makes sense. Good business sense. And, now, regulatory sense.
Under the FSA Conduct of Business Rules, the FSA says that financial promotions - a term that encompasses any invitation to engage in investment activity, targeted at private clients* and presented via mass media advertising in any form, direct marketing, online communications, and personal contacts - must be clear, fair and not misleading.
The penalties for non-compliance can be severe, so it really does pay to understand the rules and make compliance as certain as possible. The final decision to proceed with any specific promotion remains with your organisation as an authorised body. But, at Momenta, widely recognised as a leader in financial services compliance and risk minimization issues, we have established a Financial Promotions Studio (FPS) to provide our clients with additional, objective, knowledgeable reassurance.
Interpreting the rules is not necessarily straightforward because some criteria have to do with the context in which a promotion is presented. So, for example, an advertisement that sits comfortably in a trade paper might incur an FSA penalty if placed in a weekend supplement.
* Although the regulations are designed primarily to cover promotions targeted towards private clients, those aimed at market counterparties or intermediate customers may well still need to conform to the rules. |
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The regulations are extensive but here is an overview of key factors:
• A need to ensure that adequate procedures are in place to assess financial promotions, and to ensure the prompt withdrawal of any promotions that are not compliant.
• Care must be exercised over the use of superlatives. Such words as ‘best’ and ‘guaranteed’ can only be used when they are supportable in fact.
• A balanced view of any product must be provided. It is not acceptable to list benefits without giving equal weight to any risks.
• The presentation of historical performance data can be a sensitive issue; it is always necessary to remind the target audience that past performance is no necessary indicator of future performance.
Assuring compliance is, therefore, not necessarily easy, which is why we have created the Momenta Financial Promotions Studio.
† Momenta is not authorised and regulated by the FSA and therefore cannot approve financial promotions under section 21 of the Financial Services & Markets Act. |
