Finance Index
14.1 General Points
14.2 Investments
14.3 Savings and Deposits
14.4 Lending and Credit
14.5 Insurance
14.6 Mortgages
14.7 Non-UK Based Timeshare
14.8 Early Pension Redemption
14.9 Personal Injury Advertising
Rule 9 of the Code covers Finance and Investment and should be referred to when proposing to advertise such products.
The Code refers to the definition or a financial promotion used in the Financial Services and Markets Act 2000 (FSMA): “an inducement or invitation to engage in investment activity”. This definition is wide and includes advertising for deposits and insurance products.
The Financial Services and Markets Act 2000 (FSMA) is the legal instrument of financial regulation in the UK and is applied by the Financial Services Authority (FSA).
The FSA regulates the conduct of business, including advertising, for investment products. Please also refer to the FSA Handbook for FSA guidance.
Most financial advertisements fall under the FSMA or the Consumer Credit Act 1974 and the Regulations made under them.
Nothing may be described as an investment unless it subject to regulation under the FSMA. Therefore, describing items such as fine wines or paintings or any other unregulated product as an investment is not acceptable.
FSMA requires advertisers to be ‘authorised’ or ‘exempt’. In practical terms the majority of advertisers will be ‘authorised’ but if any are exempt Clearcast will require written confirmation of exemption.
All financial promotions must be approved by an ‘authorised person’ as defined by the FSMA. Clearcast staff are not ‘authorised persons’. The ‘authorised person’ must view and approve the broadcast version of the advertisement before approval can be given by Clearcast.
It is recommended that legal advice should be taken to determine compliance with FSMA.
14.1 General Points
Consumer selection of the most appropriate financial products or services is usually based on consideration of many factors. Television advertising cannot clearly communicate large amounts of information so therefore it is not the best medium to advertise high risk or specialist investments. Such products are unlikely to be acceptable for television advertising.
Limitations or restrictions on financial products or services are commonplace and these must be made clear in the advertising and be readily understood by the average viewer.
Financial promotions must not ask the viewer to buy directly ‘off the screen’. There must be a further stage where more information is supplied in order that the viewer can make an informed choice.
14.2 Investments
Particularly high risk investments are unlikely to be acceptable for television advertising. In cases of doubt, Clearcast will seek expert financial advice. Advertising for financial publications must not make recommendations about specific investments.
All investment advertising must be approved by an ‘authorised person’ (usually the compliance officer of the advertiser’s company).
14.3 Savings and Deposits
Interest rates on savings must be accurate while advertising is being transmitted. Where changes to rates occur the advertising must immediately be amended to reflect the prevailing rate or the advertising removed.
Rates of return on savings can depend on certain conditions e.g. minimum deposit, deposit period, withdrawal notice period etc. Such limitations must be made clear in the advertisement. Interest can be stated as gross or net of tax but the advertisement must state which figure is being used.
Financial companies can make reference to the fact that they have no shareholders but cannot, without convincing evidence, claim that as a result of this they are able to offer to offer better deals.
14.4 Lending and Credit
Credit advertising must comply with Section 46 of the Consumer Credit Act and regulations made under it as applied by the Office of Fair Trading (OFT). Authoritative advice should be sought where there is doubt about their applicability or interpretation.
The Consumer Credit (Advertisements) Regulations 2004 came into force on 31st October 2004.
The Guidance Notes for these Regulations (including assumptions for the calculation of the APR) are very helpful and advertisers should refer to these. They are available from the DTI website (dti.gov.uk).
14.5 Insurance
Life insurance advertising must not exaggerate the benefits payable on death nor may they use unjustified appeals to fear regarding the consequences of not taking out such policies.
Insurance for life cover and other items such as car and home should not suggest that the advertiser’s product will invariably save the consumer money. Phrases such as “You could save money”, etc. are acceptable provided they are substantiated.
14.6 Mortgages
On 31st October 2004 advertising for mortgages came under the responsibility of the FSA. The FSA have produced rules for the conduct of mortgage business - MCOB – and advertising will have to comply with these. Rules for advertising are to be found in Section 3.6 of MCOB.
Mortgage advertising has to be ‘authorised’ by an ‘authorised person’. As stated above, Clearcast staff are not ’authorised persons’ and will require written confirmation of authorisation for the purposes of the FSMA. Neither are they competent to interpret or advise on these rules, therefore advertisers should seek appropriate advice when preparing mortgage advertisements.
14.7 Non-UK Based Timeshare
Advertisements for non – UK based timeshare properties should not mislead as to the price of such arrangements and should contain an warning to seek legal advice before entering into such agreements.
14.8 Early Pension Redemption
Advertisements for cashing in pensions early must not make inflated claims as to the benefit of doing so. Since this can be quite a complicated financial arrangement, advertisements should state that independent financial advice should be sought.
14.9 Personal Injury Advertising
Advertising for compensation, commonly as a result of an accident, should not make claims about the certainty of winning a settlement nor inflate the likely amount to be paid out if successful.
Many advertisers of such services operate on a ’no-win no-fee ‘ basis. This type of advertising should not suggest that there is no cost involved in not winning if, for example, the consumer is usually required to pay disbursements and either take out indemnity or risk having to pay the other side’s legal costs in the event of a lost case. Such claims should therefore be qualified. Qualifications such as ‘other costs may be payable’ or ‘subject to insurance cost’ (or similar wording) will be appropriate in these cases.