The Financial Services Authority is bound by law to process complaints about ‘financial promotions’ advertising that comes within its remit under the Financial Services and Markets Act 2000. For the FSA’s latest report on its work.
Topic: Financial promotions
Who: The Financial Services Authority
Where: London
When: July 2003
What happened:
The Financial Services Authority published statistics in respect of its handling of complaints about financial advertising between 1 October 2002 and 31 March 2003. During this period the FSA looked at a total of 219 possible cases for enforcement action. 93 of these cases came before it as a result of complaints from members of the public. Of the remainder, 59 cases came before the FSA as a result of advertisers' competitors reporting them and the remainder were picked up by FSA officials. Out of all these, only 87 cases were pursued, the remainder being either outside the FSA's jurisdiction or regarded as not raising any relevant issue.
In 84 of the cases pursued, the complaint was upheld and the advertisers concerned ordered to either amend or withdraw the advertising in question.
In 8 cases the FSA considered the position serious enough to order the advertiser to contact its customers to highlight the risks that were not made clear enough in the initial advertisement. The product types dealt with most often were equity ISAs and income and growth plans (both 13%), pensions (6%) capital protected products (5%) and shares/share dealing (4%). The main concerns expressed by members of the pubic when reporting cases to the FSA were risks not being made clear, unfair comparisons, misleading return claims and unrealistic headline benefits.
For instance, one advertisement claimed that a fund was a top performer in its sector but did not make clear that there were only two funds in the sector. A number of reports concerned claims about capital protection where the feature was prominently highlighted but the return of capital was actually not guaranteed.
Why this matters:
It is interesting to have this information from the FSA, but, as the FSA itself accepts, woefully inadequate in terms of a regulatory process being seen to operate and to operate fairly. The only satisfactory way in which this system can work going forward is to adopt the Advertising Standards Authority model, which is to fully publicise the handling of each complaint individually, identifying the advertiser concerned, describing the advertisement and giving the findings of the FSA. Only in this way will the authority build a profile of recognition, and only in this way will complaint levels increase to a point at which it is clear that the existence of the regulatory process has the public recognition it needs.
It is particularly important that the FSA gets its house in order here over the next year, since by the end of 2004 advertising for mortgages and general insurance will also come within its remit. Unless the FSA is going to wash its hands of complaint processing in this sector and leave it to the Advertising Standards Authority, the volume of advertising in these sectors and the inevitable exponential increase in the levels of complaints that the FSA will receive will require a step change in the FSA's complaint handling and publicisation process.
