The FSA is planning to issue guidance to ensure firms explain to consumers what is meant by terms such as ‘guaranteed’, ‘protected’ and ‘secure’ when they are used in financial promotions.
In its quarterly consultation paper published today, the FSA says it has carried out a review of products which use terms which may be misleading to consumers, including structured products.
The FSA says: “In recent years, to meet demand from risk-averse consumers, the financial services industry has developed a growing and innovative market for products, including structured products, which are often described as ‘guaranteed’, ‘protected’ or ‘secure.’
“We have reviewed this market and concluded that some firms promote these products without any clear and adequate justification for the descriptions used. We believe this could be implicitly misleading and could lead to consumers misunderstanding that is actually offered to them.”
The regulator is proposing to introduce guidance on the use of such terms through the Conduct of Business Sourcebook and the Banking Conduct of Business Sourcebook.
The FSA says this is to ensure firms understand more explicitly what it deems to ‘fair, clear and not misleading.’
Firms will have to make it clear what terms such as guaranteed, protected or secure mean to consumers in financial promotions or product literature.
The FSA adds if it proceeds with these proposal firms will have six months to comply.