Four misleading financial promotions clamped down on each week

Research from global financial services regulatory consultancy Bovill has found the Financial Conduct Authority (FCA) intervened to ask firms to change or withdraw 225 adverts promoting financial products in 2018.

A Freedom of Information request found that this was down from the 251 requests the FCA made in 2017.

Although the numbers are significantly high, the findings overall indicate a long-term decline in the number of FCA interventions. The 2018 figures represent a fall of nearly a third (31%), compared with the last time Bovill researched the figures five years ago, which showed 328 equivalent requests in the 12 months leading up to June 2014.

Under the Financial Services and Markets Act 2000, the FCA has the power to ban financial promotions or adverts that it deems to be “unclear, unfair, or misleading”.

In its response to a Freedom of Information request about their use of the powers, the FCA highlighted that the powers “do appear to be an effective deterrent, in that many firms usually address our concerns before we need to use them”.

The response from the FCA shows that it has only once used its powers to force a firm to withdraw a financial promotion, in December 2018. The FCA directed London Capital and Finance PLC (LCF) to withdraw its promotions of its mini-bonds, as it was marketing them as ISA-eligible when they were not. The FCA in the same week barred LCF from regulated trading and the firm went into administration in January this year. The directors of LCF were in March reported to be under investigation by the Serious Fraud Office.

Mark Spiers, partner at Bovill, said:

“It is a positive sign that there has been a long-term fall in the number of FCA interventions with firms regarding financial promotions. However, while firms may be getting better at ensuring their adverts are clear, fair and accurate to begin with and not infringing the regulations, there are still on average about four a week.

“For many consumers, promotions and adverts are crucial in helping them come to a decision over whether a financial product is one they are happy to choose. Therefore the regulations play an important role, not only in protecting consumers and their ability to make informed decisions, but in ensuring companies aren’t at risk of reputational damage from being seen to have misled them. The best protection for a company – either before issuing a promotion, or after receiving an FCA request to amend one – is to take regulatory guidance, to avoid falling foul of the watchdog.”

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