Past performance data can only be used in advertising providing the firm displays "standardised info...
Past performance data can only be used in advertising providing the firm displays "standardised information" to balance the bias towards using impressive performance figures and is not too prominent over other info, says the latest consultation paper from the FSA.
New measures to tackle the use of past performance have just been unveiled this morning which, among other things, require firms to display data in tables showing returns for up to five rolling 12-month periods, says early information about CP183, to present a medium-term performance of unit linked policies and funds, rather than only the best performance.
Companies will not be allowed to use past performance data in cases where the fund or product is less than 12 months old, but have been warned that giving too much prominence to past performance data might not render the advert to meet the FSA's 'clear, fair and not misleading' criteria.
Details of the paper were revealed by FSA chairman Howard Davies at the IMA's annual dinner last night, but Davies still argued the FSA's corner against using past performance data.
"We have had a lengthy debate with the industry about the use of past performance figures. The only agreed conclusion is that if there is any persistence, it applies only to underperforming funds," says Davies.
"That clearly limits the usefulness of past data for future investment choices. It doesn't mean that we should prevent consumers from having access to that data. But we do want to ensure that when firms use past performance in their adverts, it is balanced by standardised data that cannot be cherrypicked or manipulated," he adds.
Requirements are likely to be implemented some time in the first half of 2004 as closing date for responses in September 12 followed by a feedback session in late Autumn.
More details to follow, once CP183 is available on the web.
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