Financial Products and Services

1 Financial Products and Services

Central copy clearance is required.

These Rules regulate financial advertisements and not products and services, which are regulated by the financial services regulators, including the Financial Services Authority (FSA) and the Office of Fair Trading (OFT). Financial advertisements must comply with all relevant legislation, in particular the Financial Services and Markets Act 2000 (FSMA) and the Consumer Credit (Advertisements) Regulations 2004.

In this Rule, 'investment activity', 'regulated activity', 'financial promotion' and 'authorised person' have the same meanings as in the FSMA and the Financial Services and Markets Act 2000 Financial (Promotion Order 2005) (FPO). Under the FSMA, a financial promotion is "an invitation or inducement to engage in investment activity." This broad definition captures all promotional activity – including traditional advertising, telephone sales and face to face conversations – in relation to all products and services regulated by the FSA. It is important to remember that 'investment activity' under the FSMA does not cover only what are conventionally thought of as investments, but also includes deposits and all insurance, including some advertisements by insurance intermediaries - see the Insurance Conduct of Business (ICOB) Chapter 3.1.2G in the FSA Handbook.

The ASA and BCAP Executive may seek advice from other regulators when investigating possible breaches of this Rule following a complaint or monitoring.

1.1 Legal Responsibility

Advertisers are responsible for ensuring that their advertisements comply with all the relevant legal and regulatory requirements.

1.2 Misleadingness

Advertisements must present the financial offer or service in terms that do not mislead, whether by exaggeration, omission or otherwise.

1.3 Financial Promotions in Advertising

These financial promotions, regulated by the FSA,  may be broadcast in advertisements:

i those communicated by an authorised person, or those of which the contents have been approved by an authorised person;

ii those that by virtue of the FPO are required to be approved by an authorised person (ie. exempt promotions).

Licensees may need to seek legal advice if an advertiser claims an advertisement should be considered:

i not to be a financial promotion; or

ii to be a financial promotion that is not required to be communicated by or approved by an authorised person (i.e. because it is subject to an exemption under the FPO).

1.4 Approval of Financial Promotions in Advertising

Before accepting financial promotions to which Section 21 of the FSMA applies and that are not subject to an exemption under the FPO, licensees must be satisfied that:

i the authorised person issuing or approving the proposed advertisement, has confirmed that the final recorded version of the advertisement is in accordance with the Rules of the FSA;

ii a financial promotion or other advertisement in respect of regulated activity proposed by an appointed representative has been approved by the authorised person to whom that person is responsible.

Legal advice, or general advice from the FSA, may be required concerning compliance with FSMA requirements.  Please note that the FSA does not pre-vet or advise on the compliance of proposed financial promotions with the FSMA requirements.  For more information visit the financial promotions pages on the FSA website (www.fsa.gov.uk) and see the FSA Handbook, in particular Conduct of Business Chapter 3 (COB 3), Mortgage Conduct of Business Chapter 3 (MCOB3) and ICOB Chapter 3.

1.5 Interest on Savings

References to interest payable on savings are acceptable, subject to the following:

a) they must be stated clearly and be factually correct at the time of broadcast;

b) all advertisements quoting a rate must use the Annual Equivalent Rate (AER) as set out in the British Bankers' Association Code of Advertising of Interest Bearing Accounts;

c) if conditions apply to calculations of interest and might affect the sum received, the advertisement must refer to the fact that conditions apply and how they can be accessed;

d) it must be made clear whether the interest is gross or net of tax;

e) interest rates relating to variables (e.g. a bank's base rate) must be so described.

Attention is drawn to the code on the conduct of the advertising of interest-bearing accounts adopted and implemented by the British Bankers' Association and the Building Societies Association.

1.6 Insurance Premiums and Cover

Subject to any applicable legal requirement:

a) references to rates and conditions in connection with insurance must be accurate and must not mislead;

b) when specifying rates of premium cover, there must be no misleading omission of conditions;

c) in life insurance advertisements, reference to specific sums assured must be accompanied by all relevant qualifying conditions, eg. age and sex of the assured at the outset of the policy, period of policy and amount and number of premiums payable.

1.8 Lending and Credit Advertisements

a) Permitted Categories

The advertising of mortgage, other lending facilities and credit services is acceptable from:

i Government and local government agencies;

ii building societies authorised under the FSMA;

iii insurance companies authorised under the FSMA;

iv Friendly Societies authorised under the FSMA;

v persons authorised under the FSMA, with permission to accept deposits;

vi those persons and bodies granted a licence under the Consumer Credit Act 1974.

Advertisements offering unsecured credit and some secured loans must comply with all relevant requirements of the Consumer Credit (Advertisements) Regulations 2004. If the applicability or interpretation of those Regulations is in doubt, advertisers must be encouraged to seek guidance from their Local Trading Standards department.  Similarly, qualifying credit promotions must comply with the requirements imposed under FSMA and MCOB.

b) Mortgages and Re-Mortgages

i Advertisements for mortgages and re-mortgages will normally be financial promotions under FSMA and will need to comply with the requirements imposed by FSMA and MCOB 3. Advertisements for most loans secured by a second charge will be  credit advertisements and the requirements of the Consumer Credit (Advertisements) Regulations 2004 therefore apply. Particular note should be taken of the requirements in these Regulations for secured loans;

ii Advertisements for some mortgages might also have to comply with the provisions of COB (e.g. if an investment product is being sold alongside a mortgage)..

1.9 Tax Benefits

References to income tax and other tax benefits must be properly qualified, clarifying what they mean in practice and making it clear, where appropriate, that the full advantage may only be received by those paying income tax at the standard rate.

1.10 Direct Remittance

Advertisements are unacceptable if they directly or indirectly invite the remittance of money direct to the advertiser or any other person without offering an opportunity to receive further details.

1.11 Debt Management Services

Except with specific approval of the ASA, advertising for debt management services is acceptable only from bodies that:

i are licensed under the Consumer Credit Act 1974; and

ii undertake to comply with the Guidance for Debt Management Companies published by the Office of Fair Trading.

1.12 Financial Publications

Advertisements for paper or electronic publications (e.g. periodicals, books, text services etc) must make no recommendation on any specific investment offer.

1.13 Spread Betting Advertisements

Spread betting may be advertised as an investment activity under the Financial Services and Markets Act (FSMA) 2000, the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 and other FSA rules and guidance. Spread betting may be advertised on specialised financial stations or in specialised financial programming only. Spread betting advertisements must comply with the gambling rules (see Section 3, Rule 21).

A “Spread Bet” is a contract for differences that is a gaming contract, as defined in the glossary to the FSA Handbook.   For this purpose, a "specialised financial station" is an Ofcom licensed station whose programmes, with few exceptions, are likely to be of particular interest only to business people or finance professionals. “Specialised financial programming” is programming that is likely to be of particular interest only to business people or finance professionals.