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The top financial promotion mistakes and how to avoid them

Save time and trouble by fixing these common compliance errors

Getting financial promotions right can be tricky. Firms must balance their need to communicate a clear business message with the relevant FCA and Advertising Standards Authority requirements.

The ASA issues an annual survey of the most complained about advertisements. On its latest, published in February, chief executive Guy Parker said that tackling misleading ads continues to be the “bread and butter” of its work.

The ASA is much more likely to proactively monitor and pursue firms than the FCA but it can – and regularly does – pass complaints and adjudications to other agencies for enforcement action.

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So do not be fooled into thinking there is not regulatory scrutiny in this area. And remember, the same rules apply to social media advertising as well.

Let’s take a look at some of the most common compliance errors.

Lack of prominence

Many promotions need risk warnings to meet FCA rules or guidelines. The rules are there to make the reader aware of key issues. By including risk statements, the promotion is more balanced and helps firms to stay on the right side of ASA rules on misleading advertising.

But risk warnings need to be prominent. Placing them at the bottom of a long website page or at the end of a 58-slide PowerPoint presentation is extremely common but rarely good enough. Placing them close to or within the wording that triggers the warning is usually sufficient.

Before you include a claim, think: how would I explain this to the FCA or ASA if one of their representatives was in front of me?

Better prominence can be achieved by:

  • Using a font size that is similar to the main text in the promotion
  • Placing the statements in bold
  • Using a different colour background or another design feature to attract attention.

Unsubstantiated claims

Claims you make about your firm’s expertise, size or reputation need to be accurate. Try to quote a source for any claim you make in your promotion and keep a record of that source in your financial promotion register.

Before you include a claim, think: how would I explain this to the FCA or ASA if one of their representatives was in front of me?

Past performance

The FCA rules are designed to stop firms cherry-picking the best periods of performance or using performance for a period of less than 12 months.

These rules apply to information such as graphs indicating fund or index performance, and require the preceding five years’ performance to be quoted.

Non-regulated products

Promotions do not need to include your firm’s regulatory statement, although this is considered best practice for websites.

Venture capital trusts and enterprise investment schemes

These investments received specific scrutiny from the FSA in July 2011, and the FCA has adopted the same approach.

EIS/VCT promotions require balance and should not merely focus on the tax benefits. The easiest way to achieve balance is to use prominent risk statements to clarify the high-risk nature of these investments. Carefully target these promotions at a select audience.

Investment and mortgage risk statements 

A capital-at-risk warning is required where the promoted investment product or service places your client’s capital at risk. Similar warnings are required for regulated mortgage contracts. For mortgages and lifetime mortgage promotions, the typical costs of advice needs to be included.

Balance in promotions is key, as is giving yourself time to get it right.

Tony Lewis is head of compliance and technical helpdesk at Threesixty

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  1. Should this article take account of the req in MiFID 2 Art 44 that prominence must include equal font size, and that adverts should not lead with past perf?

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