You’re probably aware that the Financial Conduct Authority (FCA) has the power to ban promotions and adverts, and don’t need to follow their enforcement process to use this power.
But the start of a new year seems a good time to revisit the regulator’s rules on this – and remind ourselves what’s allowed, what’s not and what will get your marketing activity pulled.
Why will the FCA investigate?
The FCA can investigate a financial promotion or advert if they are told that it is either:
- unclear, or
What will it do as a result?
If the FCS finds that an financial promotion or advert is misleading, it has legal power to either:
- get it withdrawn, if it’s already out in the market, or
- prevent it from being used in the first place
What does the regulator consider when taking action?
Its main consideration is ‘how a financial promotion or advert could lead to people losing out’.
This ‘losing out’ can be direct or indirect. Examples of people losing out are:
- directly (eg, taking out a loan for which the real interest you pay is higher than what is advertised), or
- indirectly (eg, you take out home insurance that was advertised as providing cover against theft, you then get burgled and end up spending money because theft was not actually covered)
What actions does the FCA take against non-compliant promotions?
The regulator bases its actions on two aims:
- to help raise standards, for example for new products or in relation to new marketing channels like social media, and set ground rules
- to pre-empt other compliance breaches by sending a message to any firms thinking of using a similar approach
How does the regulator decide whether a promotion should be banned?
It identifies which ones are misleading and prioritises the most serious cases.
It then investigates further, with a number of different FCA staff reviewing the activity before they decide what action to take.
If action is needed, a committee of staff usually decides whether or not to issue a warning (known as a ‘first notice’).
This notice leads to a firm being legally requested (through what is known as a ‘direction’) to remove the financial promotion or advert.
When a promotion is banned
If this happens, the first step is for the regulator to inform regulated (also known as ‘authorised’) firms of the ‘direction’, stating its reasons for the ban.
The firm then has time to respond and to provide evidence that the financial promotion or advert isn’t misleading.
After this, the Regulator decides whether the direction needs to be amended, withdrawn or enforced.
If a firm doesn’t agree with the decision, it can refer it to a government tribunal.
If the direction is enforced and the ban comes into effect, the regulator tends to publish the decision on its website, outlining the reasons for the ban, along with a copy of the financial promotion or advert. It may also put out a press release.
The negative publicity arising from a ban is therefore significant. And this comes in addition to any direct losses in the form of wasted creative spend, spend on advertising space and the potential lost sales incurred via a lack of marketing.
Ensuring all your materials follow the correct compliance approval process is vital in preventing the negative fall-out from a ban.
- They need to comply with the recently-updated guidance on fair treatment
- They need to meet guidelines on suitability for the intended audience – particularly important if you are targeting vulnerable consumers
- They need to include the right disclaimers and disclosures
- All essential information has to be given sufficient prominence
- Importantly, the same rules apply for social media as for any other channel
- And even if you outsource responsibility for any aspects of your marketing, the regulated firm, remains ultimately accountable
Reading the latest FCA complaints data gives some good background on the transgressions that have reached the regulator’s attention recently, and gives a good idea of what to avoid doing.
How can we help you?
LS Consultancy has wealth of experience in reviewing financial promotions and can do so on a one-off or on an on-going basis.
We are also skilled in reviewing and assessing your financial promotion procedures and can assist you to establish the necessary framework to help future compliance with regulatory requirements.
Remember: Not everything is black and white when it comes to Financial Promotions, and many of the rules are open to interpretation. If you are unsure how your activities fit within the rules, please contact us.