More financial services companies are being forced to amend or withdraw advertising material following FSA intervention as the regulator clamps down on misleading adverts, new figures show.
Statistics compiled by City law firm Reynolds Porter Chamberlain show a 32% increase in the number of promotions withdrawn or amended in the first quarter of 2011 (66) compared to the same period in 2010 (50).
This jump follows a similar increase last year from 262 in 2010 from 199 in 2009.
RPC partner Jonathan Davies said the increase is a sign that the regulator is sharpening its teeth in advance of gaining new powers of intervention when it morphs into its successor body, the Financial Conduct Authority (FCA) at the end of 2012.
The Financial Conduct Authority will have new powers to mame and shame businesses whose promotional material the FCA considers likely to be misleading. It will be able to order the withdrawal or amendment of promotional material for a financial product.
Under the existing regime, the FSA can only warn firms that it might discipline them for misleading promotional material.
Davies said “There is a very competitive market for many financial products. This puts pressure on firms to make their offering stand out and it is very easy to fall foul of the rules.”
“With the FSA clamping down and with new powers for its successor on the way, it is more important than ever for businesses to make sure their adverts are watertight.
“Giving equal prominence to risks and rewards is a very judgemental concept, on which reasonable people can easily disagree. The FSA is increasingly forcing its view on firms. In future a firm which disagrees with the FCA, which will be regulating this area once the FSA is replaced, will be named and shamed before the disagreement can be resolved by an independent tribunal.
“Businesses will be particularly concerned about the naming and shaming powers the FCA will have because the reputational damage that could follow a disagreement with the FCA will be very high indeed.”
No comments yet