Ensuring your financial promotions are FCA compliant

Transcription

1 Ensuring your financial promotions are FCA compliant Q Why financial promotions must comply with regulations? The Financial Conduct Authority (FCA) requires regulated firms to adhere to their 11 principles for businesses. FCA Principle 7 requires firms to pay to due regard to the information needs of their clients and communicate information to them in a way which is clear, fair and not misleading. The FCA has produced detailed rules and guidance for those engaged in financial promotions to help firms comply. Where do I find the detailed FCA rules regarding financial promotions? The principle rules regarding financial promotions are in CONC 3 of the FCA Handbook which you can find here: The FCA has also issued important guidance to firms regarding the use of social media for marketing purposes and this can be found here: Consumer Credit Advisory Services Ltd All rights reserved 1

2 What is a financial promotion? The FCA defines a financial promotion as as invitation or inducement to engage in investment activity that is communicated in the course of business. For the purpose of this rule credit broking, debt counselling and debt adjusting fall within the FCA definition of engaging in investment activity. The definition of what constitutes a financial promotion is very wide and subject to certain exceptions outlined in the FCA Handbook. All forms of marketing intended to promote the regulated activities of firms are likely to constitute financial promotions and be subject to the detailed requirements in CONC 3. This will include (but is not limited to): Point of sale advertising Outdoor advertising Websites Leaflets and brochures Pay per click advertising Banner advertising Pop up advertising Social media marketing (Facebook, Twitter etc) Posters marketing SMS campaigns Radio/TV advertising Newspaper/magazine advertising Voice broadcasting Certain types of press releases What types of financial promotions are not subject to CONC 3 rules? There are a few items that may be considered financial promotions but which are not subject to the detailed rules in CONC 3. These include: Personal quotation or illustration forms. A one-off financial promotion which is issued to just one recipient (or one group of recipients acting jointly) where the product or service to which the financial promotion relates has been determined having regard to the particular circumstances of the recipient, and the financial promotion is not part of an organised marketing campaign. A financial promotion or communication that expressly or by implication indicates clearly that it is solely promoting credit or hire agreements for the purposes of a customer s business. However, whilst the above types of financial promotions are not subject to the detailed requirements in CONC 3, they are still subject to the general requirements of FCA Principle 7 (see above). Consumer Credit Advisory Services Ltd All rights reserved 2

3 What are the general requirements for all financial promotions? The following requirements apply to all financial promotions that fall within the scope of CONC 3: 1. A firm must ensure that a financial promotion is clear, fair and not misleading. 2. A financial promotion must be clearly identifiable as such. 3. A financial promotion must be accurate. 4. A financial promotion must be balanced and, in particular, must not emphasise any potential benefits of a product or service without also giving a fair and prominent indication of any relevant risks. 5. A financial promotion must be sufficient for and presented in a way that is likely to be understood by the average member of the group to which it is directed or by which it is likely to be received. 6. A financial promotion must not disguise, omit, diminish or obscure important information, statements or warnings. 7. Any comparisons included in a financial promotion (for example between PCP and PCH) must be presented in a way that is fair, balanced and meaningful. Firms must also: Use plain and intelligible language, avoiding jargon or technical terms that consumers may not understand without further explanation Ensure financial promotions are easily legible Specify the legal name of the firm issuing the financial promotion as it appears on the Financial Services Register, not simply a trading name (though trading names can also be included). State prominently that the firm is a credit broker and not a funder. If a financial promotion names the FCA as the regulator of the firm and refers to matters not regulated by FCA (for example fleet management services) the firm must ensure that the financial promotion makes clear that those matters are not regulated by FCA. The requirement for balance You will see that the fourth item above requires that financial promotions must be balanced and must not emphasise any potential benefits without also giving a fair and prominent indication of any relevant risks. For this purpose the FCA states that any information or statement included in a financial promotion will not be treated as prominent unless it is presented, in relation to the other content of the financial promotion or communication, in such a way that it is likely that the attention of the average customer to whom the financial promotion or communication is directed would be drawn to it. There are a number of factors that should be taken into account in considering whether or not the inclusion of relevant risks in a financial promotion is sufficiently prominent. These include factors such as: Their relative position in the financial promotion Size Legibility/audibility Colour For example, a web page listing latest PCH offers where the consumer has to scroll down to the bottom of the page to find details of any relevant risks is unlikely to meet the prominence requirements as the consumer s attention is unlikely to be drawn to the risks. Equally firms cannot rely on consumers having to click through pages in order to reach relevant risk warnings (see below). Consumer Credit Advisory Services Ltd All rights reserved 3

4 What are relevant risks? If a financial promotion includes any benefits of a product or service it must also include prominent information about relevant risks. The FCA does not define what they consider to be relevant risks however, this is likely to depend on the content of the financial promotion. The more detail a financial promotion includes about benefits the more information a firm is likely to be expected to include about potential risks. Relevant risks for a lease or hire agreement might include some or all of the following, depending on the content of the financial promotion: That finance is subject to status and conditions Whether or not the quoted price includes VAT The term of the agreement Any initial payment required Any mileage limitations and an indication that excess mileage charges could apply Whether or not the quoted price includes maintenance If maintenance is included, any relevant exclusions That charges may be payable for excessive wear and tear That the contract is a hire contract and the customer will not own the vehicle Social media marketing The FCA has issued detailed guidance regarding the use of social media for marketing purposes. Social media channels includes: Blogs Micro-blogs (eg Twitter) Social and professional networks (e.g. Facebook and LinkedIn) Forums Image and video sharing platforms (e.g. YouTube, Instagram, Snapchat etc) Some of these channels impose character restrictions so firms need to consider whether or not the channel is appropriate for use when communicating financial promotions. Each communication (e.g. each Tweet) is a stand-alone financial promotion and must comply in its own right. Consequently, firms cannot rely on consumers having to click through to reach regulatory required content. Firms should familiarise themselves with the detailed guidance given by FCA in FG 15/4 at Consumer Credit Advisory Services Ltd All rights reserved 4

5 Examples of appropriate risk warnings for use with social media Below are simplified examples of appropriate risk warnings for social media, including financial promotions that may have a restricted word count or a limited number of characters. They are only for to aid explanation, please seek professional advice or consult the FCA handbook prior to publishing any such similar risk warning. Risk area Full Warning Short warning Pay per click There may be fair, wear and tear charge at the end of the contract On return the vehicle must be in the same condition as on delivery subject to age, mileage and fair wear and tear accepted. Vehicle must be in satisfactory condition on return Subject to status and conditions Excess mileage charge applies If the vehicle exceeds the contract mileage an excess charge will apply. Excess mileage charge applies. Subject to status and conditions. Delivering compliance Firms are required to take reasonable care to establish and maintain effective systems and controls for compliance with FCA rules. There are certain steps that firms should take to ensure that financial promotions issued by them comply with FCA requirements: 1. Establish and implement a financial promotions approval process to ensure that all financial promotions are reviewed for compliance with FCA requirements before issue. 2. Consider developing and using a financial promotions checklist to be completed for each financial promotion to demonstrate compliance with FCA requirements. 3. Maintain a register of all financial promotions approved for issue, including: a. The date the promotion was approved b. The type of financial promotion c. The person who approved the financial promotion d. The duration for which the financial promotion is approved 4. Keep copies of all financial promotions and (if using them) financial promotions checklists 5. Consider developing a social media policy to give guidance to employees and agents on the use of social media. Factsheet produced in conjunction with CCAS For detailed advice and guidance including compliance support please contact CCAS Nathan Cornish, ncornish@ccas.co.uk0 For questions on the factsheet content contact Amanda Brandon at the BVRLA Tel: amanda@bvrla.co.uk Consumer Credit Advisory Services Ltd All rights reserved 5