• Doing business with the FSA
  • Being regulated
    • Financial promotions
      • Conduct of Business Sourcebooks
        • Questions for firms to ask themselves

When producing a promotion, we expect all firms to take a step back and look at it from the perspective of the likely audience.

We know that different products have different risks and different groups of consumers have different levels of understanding. With this in mind, firms must consider each promotion carefully in its own context.

Below are some high-level questions that all firms can ask themselves when producing promotions for most deposits, investment, mortgage and insurance products. These are suggestions that are intended to help, and the list is not exhaustive. They do not replace the requirement for firms to refer to, understand and comply with the rules.

Remember only the fair, clear and not misleading rule applies to image advertising. This is a defined term and limited to those promotions which contain no more than: the name of the firm, the logo, a contact point and a reference to the firm's regulated activities or to its fees or commissions. Brand advertising is not a defined term, so it will depend on its content whether it is a financial promotion, an image advertisement or an advertisement with no reference to any regulated activity.

Producing a compliant promotion

• Who is your target audience? Who is your actual audience? Information must be sufficient and understandable for both your target and actual audience. What would your audience want and need to know about the product? Is it in language they can understand? For example, avoid jargon or technical terms if the audience is not financially sophistocated.

• If the promotion is for a specific product or service, is it clear what the product actually is? For instance, is it clear what a consumer's money will be invested in? Is it in shares or a deposit? Is it clear what the product would do for the consumer and what need is being met?

• Does the promotion suggest the product or service is free of charge, when in fact there are charges?

• Are the returns quoted in the headline realistic? Or are those returns only available under strictly limited circumstances?

• Is the required commitment made clear? For instance, is the quoted return only available if the customer keeps their money invested for six years and any withdrawals before then will result in a lower return?

• What drawbacks need to be made clear? For example, is it clear what the penalties are for withdrawing the investment early?

• Is it clear whether there is risk to capital? Will the customer get their original investment back, plus some income? Or is there a risk that they will get back less than they put in?

• Does the promotion include any information on the past performance of the investment, business or financial index? If so, have you included five years of past performance data and a relevant warning?

• Is there a reference to a tax advantage? If so, you must prominently state that the tax treatment depends on the individual cirecumstances of each client and may be subject to change in future.

• Are the relevant risks and drawbacks included? Are they explained in language which the audience will understand? Are they prominently displayed? Will the audience understand the risk, or have you softened it by disguising, diminishing or obscuring important items, statements or warnings?

• Does the promotion mention any kind of guarantee? If so, is it easy to understand precisely what it is that is guaranteed? Is it actually fair to say that it is ‘guaranteed’? Is it really a ‘guarantee’ in the sense the customer audience might understand?

• Overall, is the promotion fair, clear and not misleading?

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Systems and controls - COBS 4 and MCOB 3

• Have senior management established clear strategies for marketing and relevant systems and controls? Do they have good management information that alerts them to the effectiveness of their systems and controls and, conversely, risks?

• Are there procedures that are accessible, clear and are used in practice by those designing/approving financial promotions, in line with SYSC?

• Do these systems and controls adequately apply to electronic, as well as paper, financial promotions?

• Are there adequate controls to ensure that only appropriate staff issue a financial promotion or that a financial promotion is only issued after confirmation that it complies with relevant rules?

• Is there clear accountability for design/approval of financial promotions?

• In the case of a promotion used over a period of time, can you be sure it remains clear, fair and not misleading over the whole period?

• Are records adequate and complete?

• Are complaints analysed, looking for systemic or common failures from financial promotion related complaints, and is this information factored back into your financial promotions processes?

• Is adequate training provided on the rules and processes for staff involved in designing and approving financial promotions?

• What positive steps are being taken to ensure the financial promotion approval system is operating properly?
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Treating customers fairly – COBS 4 and MCOB 3

• Are your products and services designed for a particular market?

• Does your marketing match what your products/services deliver?

• Do your target customers understand your marketing and other communications?

• Does your marketing development involve the right people outside the marketing department? For example, does marketing join up with product developers and compliance from an early stage in the process?

• How does your senior management monitor all of this?

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