The Financial Services Authority recently reported on another six months of enforcement work, tackling misleading ads for financial products.
Topic: Financial services
Who: The Financial Services Authority
When: February 2004
The Financial Services Authority (FSA) released its 6-monthly statistics on action taken in cases of misleading advertising.
The report covered the period 1 July – 31 December 2003.
This indicated that nearly 300 cases were handled during this period by the FSA, with 118 of them referred to the Authority by members of the public. Out of these, the FSA ordered changes to be made to 73.
In 5 cases, the advertising was so poor that the FSA advised the firms to write to investors explaining the risks associated with the products more carefully and offering them the chance to pull out at no cost.
The products which caused the most common complaints were precipice bonds (income producing structured capital at-risk products), spread betting, share tipping and pension unlocking products.
The most common issues taken up by the FSA were inadequate explanations of the investment and the risk warnings not being sufficiently prominent.
Apart from complaints from members of the public, the FSA also takes up cases following its own monitoring of relevant media such as regional newspapers and daytime television ads. The FSA noted in passing that during its recent monitoring of those two channels, many of the promotions for financial products were for credit cards, mortgages or personal lending, none of which were currently regulated by the FSA. However, financial promotions covering mortgages will be regulated by the FSA from 31 October 2004 and they will regulate promotions for general insurance products from 14 January 2005.
Why this matters:
In recent monthly updates on marketinglaw, we have reported the increasing activities of the FSA in monitoring and penalising financial advertisers who breach the rules. Although 300 cases in 6 months is hardly an avalanche, it certainly represents a picture of increasing activity, and this trend is certainly not going to change once the FSA starts to regulate mortgage and insurance advertising. Here, it will come into potential conflict with Advertising Standards Authority, much of whose time is currently spent dealing with complaints in respect of advertising for mortgages and insurance products. There is a clear and increasingly urgent need for an understanding to be developed between the two regulators before the FSA takes on its new powers.