FCA Dear CEO letter - FCA sets out its expectations on financial promotions

On 9 January 2019 the FCA issued a letter on its website addressed to the CEOs of all FCA regulated firms to remind them of their responsibilities relating to the use of financial promotions. 

What is a financial promotion?

A financial promotion is an invitation or inducement to engage in investment activity. Any form of communication (including through websites and social media) is capable of being a financial promotion. The definition of a financial promotion is set out in the FCA’s Perimeter Guidance Manual.

Financial promotions or adverts can be the most regular contact that consumers have with firms that offer financial services and products. They can cover products such as loans (e.g. payday loans, guarantor loans, car finance); investments (e.g. bonds, stocks and shares, contracts for differences, collective investment schemes); cash savings and bank accounts; insurance (e.g. home, motor, travel); pensions; mortgages; life assurance; and payment services and e-money (although not cash-to-cash ‘bureaux de change’ activities).

It is unlawful in the course of business for a person to communicate a financial promotion unless (i) that person is an authorised person, (ii) the content of the communication is approved by an authorised person, or (iii) a relevant exemption applies (section 21 of the Financial Services and Markets Act 2000 (FSMA)).

What does the FCA want?

Clarity! The FCA wants all financial promotions to be fair, clear and not misleading so that consumers can make informed decisions. Financial promotions often form a significant part of a consumer’s product knowledge, and can influence a consumer’s decision making when choosing a product. 

What’s the issue – why have the FCA published this letter now?

Regulated and unregulated business  

Some of the firms that the FCA regulates carry out both regulated and unregulated business. The FCA has recently become aware of firms issuing financial promotions which suggest or imply that all of the activities which they undertake are regulated by the FCA and/or the PRA, when in fact this is not the case. 

Where a firm names the FCA and/or the PRA as its regulator in a financial promotion that refers to aspects of its business which are not regulated by the FCA and/or the PRA, then the promotion needs to make clear which aspects are not regulated.

What can the FCA can do?

The FCA does not approve advertising and makes it clear that it is up to firms to ensure that financial promotions are compliant with their rules. However, the FCA does monitor adverts across different media in the UK. 

The letter serves as a reminder of the importance of accuracy and clarity in financial promotions. It also highlights the regulator’s ability to give a direction under s.137S FSMA where a financial promotion or advert is deemed to be misleading.  

A direction provides the opportunity for the FCA, among other things, to require the withdrawal of a communication (or approval) or prevent it from being used in the first place. Where the FCA issues a s.137S direction, it must give written notice setting out its reasons and informing the recipient of the notice that they may make representations to the FCA within the period specified in the written notice. 

Doyle Clayton’s regulatory expertise means we are well placed to support our clients in this area. Please contact Charlie Herbert or your usual Doyle Clayton contact to discuss how we can help you.