In the world of financial services, the term ‘financial promotion’ is heard a lot, but what does it really mean? Quite simply, it is the Financial Conduct Authority’s way of referring to an advert or marketing communication.
It is a generic term and covers all different types of advertising, from traditional TV, radio and newspaper ads, to social media blogs, posts and direct marketing messages.
There are, however, also FCA rules that go with making financial promotions, which are aimed at protecting the public.
The overriding rule is that all financial promotions must be fair, clear and not misleading. This includes general requirements and some specific ones to the particular relevant sector.
Generally, the promotion should:
name the company involved;
not disguise, diminish or obscure important items, statements or warnings;
provide important information in a prominent way;
be presented in such a way as likely to be understood by the average customer;
be constantly presented in the same language as other communications to a customer; and
be up-to-date and relevant to the means of communication used.
The FCA has additional conduct of business rules for specific sectors, which place further requirements on how a financial promotion should be presented. For example, the rules for claims management companies require in certain circumstances that the promotion includes a prominent statement to the effect that the potential customer does not have to use the services of a claims management company and, indeed, may make the claim themselves for free.
The rules on financial promotions are set to be enhanced further by the introduction of the FCA’s ‘Consumer Duty’, which is the new Principle for Business 12, which will require firms to “act to deliver good outcomes for retail customers”. Financial promotions will be required to “provide timely and clear information that people can understand about products and services so consumers can make good financial decisions, rather than burying key information in lengthy terms and conditions that few have the time to read.”
Of course, the rules on financial promotions are also subject to the laws on direct marketing, if they are targeted at particular individuals, such as PECR 2003. So not only will the FCA be taking a keen interest in such marketing, but it may also be a matter for the Information Commissioner's Office.
Solicitor Andrew Swan commented: “I have dealt with a lot of enforcement cases by the regulators concerning financial promotions, both by the FCA and ICO, on occasions both at the same time. It is imperative that companies get their promotions right. There are many considerations before a promotion should be published or sent to a potential customer, so I often advise businesses on the laws and rules before their marketing goes live.”
For more information please contact Andrew at firstname.lastname@example.org or on tel: 07907 308773.