Nick Jones, Manager, Communications and Strategy Financial Promotions Department FSA began with a presentation on what the FSA is trying to achieve through the financial promotions regime. Financial Promotions fit into the Retail Agenda and are integrated into the Treating Customers Fairly project aiming for firms to produce information that is clear, fair and no misleading with the emphasis here being on fair. There is an information gap between firms and consumers with some very complex products consumers do not understand. Not everything should be down to the promotion it self as firms should also think about the complexity of their products.

FSA have been focused on financial promotions for the last two years and increased their resources over the last year to target this area. With long-term contracts customers may purchase something they did not expect but not realise that until some years later. What you cannot replace is the time lost. Direct Offer material especially may be the only information they receive so its important to get it right.

Caveat emptor still applies to customers but is not there to protect the customer from non-disclosure an issue for which firms have responsibility. FSA are very keen to avoid tick boxing against the rules. Once checked against the rules step back and ask whether something is clear, fair and not misleading in the round.

Public understanding needs to improve and this is a long-term project. FSA want consumers to buy and do not wish to stop buying and selling taking place. The balance has to be struck between innovation and protection. There is a strategic review around what FSA mean by clear, fair and not misleading. It is a senior management responsibility but is different in different contexts and very difficult to define. With MiFID in the background FSA will be moving increasingly towards more principles based than detailed rules.

The clarity of the product and the target audience is essential in understanding what it is that is being promoted for what need. Technical terms are not enough and this very much depends on your target audience. Risk warnings must be there but FSA do not prescribe risk warnings. Just because they are being used think to yourself, ‘Is this the right way to describe it?’ It may be the warning is right for one product but does not fit with your own. Too many risk warnings can also become meaningless.

Balance is key and FSA are particularly concerned with headline claims. Check whether the claim is achievable and realistic. APRs are very important but are an amalgamated possible return, which must be clearly explained. What period and how it is worked out plus making sure the early redemption penalties are clear is essential.

Mark Taylor from the Review and remediation Team Financial Promotions FSA went through some examples of misleading advertisements. From the examples it was not clear what product was being promoted and risk warnings were not sufficiently prominent.

There is frustration around what FSA actually want and the apparent changing parameters. What FSA want is an holistic approach recognising what is out there and the levels of consumer sophistications. Mortgage regulation is too early to tell as transitionals end on Monday and FSA are continuing to work on guidance around the overlap between CCA and FSA regulations. Guidance is nearly there and help will be provided.

Prominence is important to MCOB more than balance in the COB rules. Risk warnings at the bottom and tucked way are a concern. Consumers should be able to walk away with the knowledge they need. Posters in a branch that have risk warnings at knee level or behind a counter are not likely to be possible to read. There is no ban on small print but what FSA requires is prominence.

Recent enforcement cases have been around relationships between marketing and compliance and it all came down to a break down in systems and controls. With one case Compliance said no but the advert went ahead anyway. Systems and controls are important. Who is checking up on your policy reviews? What is senior management involvement?

FSA want to share more information for firms in future. There are general lessons to communicate. However FSA have a range of regulatory tools and they will use them. FSA do not provide a pre-vetting service. There are a lot of firms outside London and they welcome the opportunity to go out as with today’s meeting. There will be new industry pages very soon, which FSA recognise, have taken a long time to get up and running. It is very important to get it right and not go beyond the legal restrictions they face. The hotline has also proved very useful to FSA and firms are encouraged to use it. It gives FSA a lot of information they would not otherwise be able to get. In the business plan financial promotions are again a priority and now the logistics have been set up they are ready to fulfil this objective. It is too early to comment on insurance regulation with FSA’s beginning this month.

Kevin Farrell