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FSA clamps down on misleading advertising

Davies.jpg

The FSA has ramped up its focus on misleading advertising, resulting in a 32 per cent increase in the number of promotions withdrawn by financial services firms.

A freedom of information request from law firm Reynolds Porter Chamberlain shows insurers, financial advisers and banks withdrew 262 promotions in 2010, up from 199 in 2009 following enquiries from the FSA.

In the first quarter of 2011, 66 promotions were withdrawn, compared to 50 in the same period in 2010.

RPC partner Jonathan Davies (pictured) says the regulator is sharpening its teeth in advance of gaining new powers of intervention when it morphs into the Financial Conduct Authority in 2013.  

He says: “Giving equal prominence to risks and rewards is a very judgemental concept, on which reasonable people can easily disagree. The FSA is increasingly forcing its view on firms.  

“In future, a firm which disagrees with the FCA, which will be regulating this area once the FSA is replaced, will be named and shamed before the disagreement can be resolved by an independent tribunal.

“Businesses will be particularly concerned about the naming and shaming powers the FCA will have because the reputational damage that could follow a disagreement with the FCA will be very high indeed.”

The Financial Times says promotions that were withdrawn include an advert for an investment fund that claimed a 30 per cent headline growth rate but buried risk warnings in the small print and a mortgage broker website that failed to disclose fee information.

The FSA has fined 14 firms more than £1.5m since 2004 for promotions breaches.

Speaking to the Financial Times, FSA head of conduct risk Nausicaa Delfas says: “One of our regulatory requirements is that firms’ financial promotions must be fair, clear and not misleading.

“We take a tough stance on this, in line with our more pre-emptive and interventionist approach – anticipating potential consumer detriment where possible and stopping it before it occurs.”

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Comments

There are 15 comments at the moment, we would love to hear your opinion too.

  1. Hypocrisy at its best FSA.
    Free financial advice that is neither free nor advice! get a grip you are your own worst enemy!

  2. That is the best laugh I have had in ages. The FSA are clamping down on misleading advertising, however they are quite happy with the Money Advice Service advertising that offers Free and Independent Financial Advice!!!

  3. Great idea.

    Start with the ‘Money Advice Service’….

    You couldn’t make it up.,,

  4. Once again, quite unbelievable hypocrisy from the Clowns in Canary Wharf.

    Have you asked the Money Advice Service to withdraw their advertisment yet?

  5. Two sayings spring to mind:

    It sounds like “the kettle is calling the pot black”

    and “Regulators (sic) who live in a greenhouse shouldn’t throw stones”.

    Incidentally, talking about the FSA’s particular ‘greenhouse’ (Canary Wharf) wouldn’t our regulatory fees be an awful lot less if the FSA didn’t occupy some of the most expensive real estate on the planet???

    (The MCCB fees were very reasonable – anything to do with their being based in Stoke, perhaps?)

  6. 1st August RPC appoints new Marketing PR director and proceeds to flood the meeja with non news stories puffing the services of RPC. I call on journalists not to be taken in with these non stories, FOI information and surveys are always a giveaway. Hey, perhaps the FSA should replace current PR adviser Ronald McDonald and speak to RPC.

  7. This has all been tried before. It’s called communism/fascism/nazism/totalitarianism.

    It failed.

  8. Have recently complained to the FSA and Advertising Standards Comission about the Money Advice Service adverts in relationship to the following:

    This is an information service and NOT ADVICE as the name suggests.

    As no advice is given how can it be free?

    The information provided is not backed with a government guarantee.

    All of the above points have been raised by myself with the FSA and the ASC but needless to say the comments coming back have been nothing short of a whitewash.

    I support greater regulation in the field of advertising as we recently ran a campaign against the Chesea Building Society for the following misleading advert http://essentialifa.wordpress.com/2010/11/18/chelsea-building-society-misleading-18-capital-protected-bond/

  9. Whilst the prospect of naming and shaming before any dispute is resolved is worrying, if not at all unexpected. What real effect will it have on Joe Public and reputations? Most people who have ever heard of the FSA think it is to do with Food and everyone I meet, inside and outwith Financial Services who know who they are hold them in compllete and utter contempt. Why will the FCA be any different?

  10. Notwithstanding the ridiculous situation with the MAS advertising, the FSA’s Financial Promotions team overall do a good job. Too many firms would be only too pleased to mislead, deliberately or unintentionally, consumers. Our industry should welcome this part of the regulator’s activities.

  11. In response to ‘Anonymous’ in relation to real estate – the regulator not only operates from Canary Wharf but also has a large office in Edinburgh and the MAS / Consumer Financial Education Body operate out of No. 1 Canada Square.
    Regarding budgeting, you would be surprised at how many ‘ consultants’ on high daily rates are employed at 1 Canada Square, too! – Perhaps FOI request could illuminate?

  12. Lindsay Bateman 22nd August 2011 at 2:22 pm

    Let us not divert ourselves from the issue at hand. This principal has to be the right one for the industry long term. Misleading, incomplete or factually incorrect promotions of products and services has no place in the financial industry, or in any other sphere of activity for that matter. We have already seen the damage caused in this regard, and many firms suffered censure from the appropriate regulator as a result – and with more to come no doubt…

  13. gaazza, explain or define the word ‘SECURE’ as in SECURE INCOME BOND, which were marketed with the blessing of the FSA by our old friends at Keydata?

    Me thinks you have been at the bottle again?

  14. Whilst there can be no argument against forcing the withdrawal of misleading promotions, it is galling that the FSA doesn’t apply the same standards to the MAS.

    Yesterday, I saw the latest version of what used to be the FSA’s Money Made Clear booklet on options at retirement. It’s virtually identical save only for the substitution of MAS for MMC on its cover.

    I discussed it with the client and acknowledged that whilst it’s a very good booklet, it doesn’t provide anything in the way of advice, it’s just an information booklet. He agreed. So why is the FSA allowed to put out booklets that aren’t what their labels suggest them to be whilst on the other hand banning misleading financial promotions produced by other organisations? As ever, it’s one set of rules and standards for everyone else, whilst the FSA basically does and is allowed to get away with whatever it damned well pleases. That’s wrong. But, from what we hear, the TSC seems at last to be aware of it. A colleague of mine received the following reply from one of the TSC Assistants:-

    Thank you for writing to the Treasury Committee. Mr Tyrie has asked me to reply on his behalf. You may be interested to know that in the autumn the Committee will launch an inquiry into the accountability structures of the FCA, the body which is proposed to replace much of the FSA. Full terms of reference will be issued in due course.

    Well, okay, it doesn’t say much, but at least it’s on the Committee’s radar.

  15. Why can’t they just leave adverts to the ASA who seem to know what they are doing… they could always issue some clear guidance-for once!

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