Most firms use financial promotions to reach prospective clients, or to inform existing clients about a new product or service. These include posters, social media promotions or even their website.
When creating promotions, there are compliance points to bear in mind. Financial promotions are easily visible to the FCA, and communications that do not comply with requirements can prompt unwanted attention.
During the Covid-19 crisis, you may want to send out communications to your clients, particularly due to the potential short-, medium- and long-term market effects of a global lockdown. But it is worth being aware of a recent Advertising Standards Authority ruling in which adverts were labelled irresponsible because they “made misleading claims, and did so in a way that exploited people’s fears about the virus”.
To give this some context, an advert that could be seen as in poor taste is: ‘Concerned about coronavirus? Come and see us for critical illness cover!’
Understanding behavioural biases
Another tactic that has been used to get punters through the door is to inform individuals that now is, unequivocally, the best time to invest. Although hypothetically this may be true, there is no evidence to confidently back up the claim – and markets could take another tumble, meaning the advert is misleading.
The ASA says: “Think very carefully before you make any direct or implied claims about coronavirus or Covid-19 in your advertising – all ads must be prepared with a sense of responsibility to consumers and to society, and the ASA is unlikely to have any patience for marketers seeking to unfairly exploit the outbreak to sell products or services or otherwise make claims that would be considered socially irresponsible.”
Social media influencers
Some companies utilise the profile of social media influencers to discuss, photograph and/or recommend their products. For example, lifestyle influencers may be remunerated to promote insurance products as a way of protecting the home and a young family. As the influencer is remunerated, the promotion is subject to consumer protection law and possibly the UK advertising code (where the company has control over the content).
If you are considering using a famous face for your advertising campaign, it’s really important the audience knows it is an advert and does not believe a tweet or post is their favourite celebrity’s opinion. Failure to disclose a commercial relationship leaves both parties at risk of action from the ASA.
Regulatory and non-regulatory statements
Advertisements such as flyers, posters, billboards and brochures are normally presented on a generic basis, so it is not necessary to state your firm is ‘authorised and regulated by the Financial Conduct Authority’, although you may choose to include this.
It is not the content of the advertisement that dictates whether a promotion needs the firm’s regulatory statement, but how it is transmitted; that is, if the firm’s letterhead or electronic equivalent (email) is used, the regulatory statement is mandatory, while it is best practice for websites. The contents of the promotion may also include details of services and products that are not regulated by the FCA. If so, and if you include the regulatory statement, you must point this out to your clients.
ASA bans investment advisory service advert
Prominence of risk warnings
For all types of promotion, you are required to include risk statements where appropriate. Once you have established the correct risk warnings to be used, you need to ensure they can be seen.
The FCA expects risk statements to be included in a prominent position on the promotion. They should be visible to the client while they are reading about the product or service to which they relate. For Mifid, business risk warnings need to be “at least equal” in size to the information displayed.
If past performance is contained in a financial promotion, it must include a source and date, and demonstrate at least the past five discrete years or all data since it was established.
Past-performance content should also include a prominent warning that ‘past performance is not a reliable indicator of future results’.
Past-performance data should be recent. The ASA has commented previously that “marketing communications must not mislead consumers by exaggerating the capability or performance of a product”, so including data from an economic boom period alone could be questioned.
Where your financial promotion includes facts and figures, these must be backed up. Include the source and date of the information contained within the promotion, and retain this on file.
Withdrawing financial promotions
If you become aware an approved financial promotion has become out of date or ceases to comply with the relevant FCA rules, you should withdraw it as soon as it is reasonably practicable.
To market to your clients, you must have obtained their prior consent. Most firms do this as part of their disclosure documentation.
Clients must also be made aware of their right to withdraw this consent at any time.
Celia Williams is compliance consultant at threesixty