Marketinglaw has often called on the FSA to open up its regulatory books and report publicly, a la Advertising Standards Authority, on its financial promotions investigations. Now the House of Commons Treasury Select Committee has taken up the cudgels.
Topic: Financial Services
Who: Financial Services Authority, and John McFall, head of the House of Commons Treasury Select Committee
When: 9 November 2006
John McFall, who heads the House of Commons Treasury Select Committee, has called on the FSA to take a "far more robust" stance on misleading financial promotions and to publish greater details of its investigations. According to an article in the Financial Times, in his letter to the FSA, Mr McFall draws a comparison with the Advertising Standards Authority, which publishes such details, including, crucially, explanations of why the ASA found for a certain advertisement. Highlighting good practice, as well as providing reasons for censure, would he argues lead to greater adherence to the rules, as well as enabling public scrutiny.
Why this matters:
Calls for greater transparency will no doubt hurt the FSA: financial promotions is an area where the FSA has focussed resource and published various papers and statements setting out its current thinking, the results of market study findings and its priorities and where it has already responded to calls for more details in the Final Notices which accompany enforcement decisions (for example, these now include copies of the offending promotions).
In its defence, the FSA adopts a risk-based approach to financial promotions and, indeed, to all its activities, with risk being measured by reference to its four statutory objectives. Of these, securing the appropriate degree of protection for consumers is the most pertinent to financial promotion. This approach, its wider role and the FSA's regulatory objectives necessarily result in an approach which differs from that of the ASA.
Also, the call for more robustness comes at a time when the FSA has not exactly been limp in its enforcement stance. Within three months it has fined three firms for marketing related failures: a £455,000 fine on Loans.co.uk Limited for failing to treat customers fairly when selling Payment Protection Insurance (PPI), a £56,000 fine on Regency Mortgage Corporation, again in respect of PPI failings and a first time fine against a firm for cold calling (£17,500 fine on Capital Mortgage Connections).
However, with a move toward principles-based regulation – focusing on the outcomes that really matter, rather than on procedural box-ticking – even greater transparency of the FSA investigations into financial promotions will be desirable, if not essential.