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Succeeding in financial promotions

Governance, risk & compliance
EU / European Parliament / EIOPA, FCA

11 May 2018

The process of creating compliant financial promotion and marketing materials isn't straightforward. Firms have to balance their sales message (what they want to say) with strict regulatory requirements to disclose key product and company information and not to mislead the customer (what they have to say, what they can say and how to say it). This can be a particular challenge when explaining the complexities of some financial products.

Drawing upon OAC's experience of checking financial promotions, this article provides a summary of the key considerations, some common mistakes and practical guidance to help with your communications.

What is a financial promotion?

The Financial Services and Markets Act 2000 (“FSMA”) lays outs the restrictions on financial promotions and the FCA defines these types of communications, which are made “in the course of business” under “Regulated Activities”, as “an invitation or inducement to engage in investment activity”. Therefore, it covers a range of marketing material used to sell or promote products eg:

  • Sales leaflets
  • Printed and digital/online advertisements
  • Website and mobile app content
  • Social media
  • Email marketing
  • Scripts for radio advertisements
  • TV storyboards and video

Firms will need to test the “in the course of business” requirement for each of their communications. Non-business communications, such as social media conversations involving groups and individuals not acting in the course of business, are outside the scope of FSMA. “Image advertising", as defined by the FCA, can fall outside the scope of FSMA as long as it conforms to the following definition from the FCA Handbook’s Glossary Terms (also a useful reference to FCA terminology):

Image advertising

A communication that consists only of one or more of the following:

(a) the name of the firm;
(b) a logo or other image associated with the firm;
(c) a contact point; and
(d) a reference to the types of regulated activities provided by the firm, or to its fees or commissions.

Checking your financial promotions

When checking financial promotions, it's important to have knowledge of all applicable rules and regulations (including those that are non-industry specific such as GDPR and data privacy), as well as the FCA’s latest thinking, for example:

  • "Stand-alone" compliance of financial promotions.
  • Prominence of risk warnings.
  • Balance of risks versus benefits.
  • Ease of website navigation.
  • "Fail-safe" requirements to ensure key stages of the buying process are read, understood and accepted by the customer.

The main rules on financial promotions can be found in the FCA Handbook under COBS 4; COBS 13 contains information on the requirements for Key Features Documents and Key Features Illustrations, and information on the requirements for PRIIPs are in COBS 14.

In addition, the other questions we also recommend for you to consider are:

  • Does the promotion meet the needs of the identified target group of consumers?
  • Is the information appropriate to the information needs of the consumer?
  • Is it clear, fair and not misleading?
  • Are any implied expectations of performance realistic?
  • Is proper weight given to any risks or potential drawbacks?
  • What consumer testing has been carried out, and what do the results show?
  • Have suitable privacy notices and statements been applied, if capturing personal information?

Checking one's own financial promotions, especially within a small team, can be a challenge. Compliance departments should involve all relevant expertise and stakeholders during the checking and review process – more eyes the better! You may also want to consider an independent review.

From our experience of reviewing financial promotions, the most common mistakes include:

  • Leading with past performance data – this is not permitted.
  • Not quoting "regulatory statements" verbatim. For example, we have found regular mistakes with using the required statements in Key Features Documents and Key Information Documents. The FCA Handbook at COBS 13 outlines regulatory requirements for disclosure of product information and statements. With the implementation of the Insurance Distribution Directive later this year, Insurance Product Information Documents will have similar mandatory text requirements.
  • "Financial Conduct Authority" not given in full when required to do so.
  • Language not in clear plain English for the customer to understand.

Additional resources

The following links give some other useful sources of reference from the FCA:

How we can help you

We can provide you with a cost-effective and timely independent review service to make sure all your financial promotions are compliant, clear and suitable for their purpose.

OAC are experts in governance, risk and compliance, and work with a range of insurers to assist with improving their documents, processes, governance and systems to mitigate any risk.

Contact us today for a chat or to arrange a callback request to find out how we can support you in meeting your current and future challenges with confidence.

Conolly Tunnard

For more information
Conolly Tunnard
Senior Regulatory Compliance Consultant

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