The FSA removes or amends around 300 product adverts each year it reveals today, just six months before the start of a new financial promotions regime.
The regulator also receives 70 complaints every month to its financial promotions hotline and has fined 12 firms since 2004 – amounting to £1.5m – for financial promotions failings.
However, the FSA says these statistics actually represent its progress in stamping out misleading product adverts.
It highlights the percentage of promotions it deems have fallen below its standards as having dropped by 20% from 52% between 2004 and 2006.
It also says mortgage broker compliance in the national press is at 90% and points out there have been over 4,000 downloads of its online financial promotions bulletin.
The figures were revealed by Nausicaa Delfas, head of TCF strategy, financial promotions and unfair terms at the FSA, in a speech at the regulator’s Financial Promotions conference in London today.
Delfas was speaking to providers about the new promotions regime, set to be introduced on November 1, which will demand new standards for the promotion of investment products.
Delfas says despite a marked decrease in the number of cases it is dealing with, the FSA still investigates too many unfair or misleading promotional adverts.
“In addition to the need to be honest and clear about what you are selling, you need to create accurate expectations about the nature of the product.
“Unfortunately, we are still seeing many promotions that fail to adhere to this.”
He highlights recent controversy surrounding GI price savings claims in promotions “which create an expectation that large savings will be available to consumers when in reality the stipulated saving will only be available to a small percentage of those who respond.”
Delfas told providers the reason for a new promotions regime, softening the fact many firms have never been found guilt of misleading on its products by adding the rulebook will actually be half the size it was originally.
He says: “If consumers fail to understand fully what is being offered to them and do go on to buy, there is a risk the products will not meet their expectations.
“Either way, this is not good business as firms may face reputational damage or complaints. So, there are clear benefits to firms, consumers and to us as regulator in acting to remove this possibility.”
Delfas says the key areas the FSA is concerned with are: explanations of risks and drawbacks, percentages and headline claims, as well as a firm’s use of small print.
He made clear to providers how fair promotions match no less than three of the regulator’s six TCF principles, adding: “TCF in financial promotions means firms standing in the shoes of their customers and judging objectively what they will take away from an advertisement.”
After mentioning the role of senior management in compliance (“In our experience, many firms still face a tug of war between marketing and compliance.”), Delfas also dealt with a gripe from the provider’s point of view.
He admits the current rules-based approach does sometimes limit a firm’s ability to promote its products in the clearest way possible, and says the FSA has removed some rules it believes had a bearing.
They include product specific rules, such as on SCARPs and EIS, and excess guidance, on which it had two pages of risk warnings for investment value fluctuations.
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