The FCA has the power under section 137S of the Financial Services and Markets Act 2000 that enables them to ban misleading financial promotions. This power means the FCA can remove promotions immediately from the market, or prevent them from being used in the first place, without going through their enforcement process.
Prominence plays a key role in ensuring that financial promotions are clear, fair and not misleading. Consequently, a number of the requirements within the Conduct of Business Sourcebook relates to prominence.
Prominence can be defined as "the state of being easily seen" - for a financial promotion, a statement is 'likely to attract attention, for instance, by virtue of its size or position'.
Key product information should be considered in relation to prominence, such as fees, charges and relevant risk statements.
Prominence is a subjective matter. Therefore, when assessing a particular statement, consideration should be given to:
> the target audience;
> the nature of the product; and
> the likely information needs of the average recipient.
Others areas of consideration for financial promotions as a whole, to ensure that the prescribed information meets the FCA's requirements, are:
> positioning of text;
> colour; and
> font size.
The FCA provides guidance on examples of good and poor practice. Here are a few examples of good practice:
> Important information, statements or warnings are shown using clear and bold type styles across neutral backgrounds and are proportionate, taking into account the content, size and orientation of the promotional material as a whole
> Both the benefits and drawbacks of a product are balanced through equally prominent statements
> Risk warnings are contained within their own distinct border, thus drawing the reader's attention to them
> Risk warnings are clearly stated within the main body of the advertisement
The general rule in communicating with retail clients requires that firms ensure that information does not emphasise any potential benefits without also giving a fair a prominent indication of any relevant risks (COBS 4.5.2R (2)). Furthermore, the information presented should not disguise, diminish or obscure important items (COBS 4.5.2R (4)).
A financial promotion should also make it clear that a product places a client's capital at risk, where this is the case. If the investment is not covered by the Financial Services Compensation Scheme, it should also make this clear.
The content of this article has been extracted from guidance as provided by the FCA and is not inclusive or exhaustive of the rules and guidance provided.
You may also be interested in reading:
What is a Financial Promotion?
Financial Promotions - Key issues to avoid
Financial Promotions - Going Digital
Pure FS Support will manage and coordinate your financial promotion process ensuring that you adhere to the rules imposed by the FCA. See more about our financial promotions services and we look forward to discussing your requirements with you. Our contact details can be found here.