Consumer groups are calling for the FSA to get the powers to protect the public from misleading advertisements.
Financial services consumer panel chairman Colin Brown says when the Treasury reviews the legislation underpinning the FSA in December it should give more authority to the FSA to police ads.
His main complaint is when the FSA get complaints about ads, it often takes months to investigate the complaint and take action.
The panel says even if the FSA decides the ad is misleading and tells the provider to withdraw the ad, it cannot name and shame the firm. It wants the FSA to have similar powers to the Advertising Standards Authority, which publishes details of misleading ads.
The ASA refuses to comment on the FSA's role, saying it is only interested in its own responsibilities.
Brown also wants the FSA to be encouraged to do more with its authority. He says: “The panel has been trying for a very long time to get the FSA to be tougher with firms and promotions. While the FSA is not entirely free to do what it wants, we do not think it does as much as it can in this respect.”
The call has been echoed by other consumer groups, such as the Consumers' Association and the National Consumer Council as well as leading IFAs.
National Consumer Council spokeswoman Janice Allen says: “We are very pleased that the panel has put this message out as it does look like there are occasions when there are misleading ads to the detriment of consumers.”
Consumers' Association senior policy adviser Mick McAteer says: “There is a general concern about advertising, not only because of past performance but also because it can often be confusing to consumers. The FSA is somewhat hamstrung by the legislation. I do not think it would be fair to blame the FSA for this.”
Syndaxi Financial Planning principal Robert Reid says: “I was not aware that the FSA did anything to protect consumers from misleading advertisements. I certainly have not seen any evidence of them doing anything.”
In January, the FSA did urge consumers to contact it if they felt any ads were misleading. It outlined the action it can take, including “naming or shaming a firm where there have been very serious or persistent breaches of the rules”.
But no one can remember it ever using that authority to name and shame.
The motivating factor behind the FSA's warning was the onset of the Isa season – if there is an Isa season. It said it would be particularly interested in ads for products such as unit trusts, investment trusts and endowments to make sure they are “clear, fair and not misleading.”
A commitment was made that, from next spring, a six-monthly overview summarising the reports received from consumers will be published.
The panel welcomes this action as a step in the right direction but says much more is needed.
However, advertisers think there is already a great deal of sensitivity about falling foul of the FSA and misleading ads are rare. According to one ad agency, the only time that so-called misleading ads become an issue is when the FSA changes its guidance and providers struggle to interpret the changes.
Ad agency CCHM chairman Lucian Camp says: “The FSA has clearly been sharpening its teeth in this area over the last year. I would say the FSA does enough already to crack down on advertising.”
Citigate Albert Frank deputy managing director Phil Hawkins says: “I do not think there is anything wrong with naming and shaming per se but I think the FSA would struggle to find companies to criticise.”
The panel rarely issues public statements of this nature. It responds to consultations on a regular basis and its opinions are often heeded by the regulator but wading in and calling for a legislative review of the FSA is almost unprecedented.
Interestingly, the January warning from the FSA was the first with the new consumer director Anna Bradley's name attached to it, having recently joined the regulator from the NCC.
Some in the industry feel that the panel is more likely to chime with the views of Bradley. But Brown says this notion is “absolute nonsense.”