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This case work example describes a case we have acted upon. It is designed to help firms understand our analysis, the issues that may lead us to contact firms and the action that may result. It does not set any kind of precedent or guide about the action we may take on similar cases in the future.

Issue

The first promotion contained references to the % of annual income in a font, which was 5 times the size of the main body of text that contained the description of risk. The promotion also contained statements regarding the % return, which were presented as statements of fact, however the return was not guaranteed.

A second promotion produced by the firm in relation to the same product raised concerns that the firm had failed to meet the overarching principle that communications with customers should be clear, fair and not misleading, in that:

• The promotion failed to fairly and accurately describe the nature of the risks of the product; and
• The promotion claimed that the underlying asset was not correlated with the stock market, but did not differentiate clearly from other non-stock market based products which would have significantly different risk profiles to the product concerned.

Action taken

In response to our concerns, the firm agreed to immediately withdraw the promotions. The firm also agreed to withdraw another promotion which contained the same content.

The firm also agreed to ensure that future promotions addressed our concerns.

Lessons learnt

1. Firms should consider whether a financial promotion appropriately highlights the risks of a product, by taking into account the overall impression a consumer is likely to have of the promotion. In particular, when making headline claims, firms should consider whether headline claims are likely to lead to the wrong impression that returns are guaranteed.
2. Firms should ensure that the risk warnings contained in the promotion are appropriate to the product, the audience and the content of the promotion, and should ensure that the risk warnings provide an appropriate balance to any positive statements contained in the promotion. In addition, positive headline statements in the promotion should be balanced by prominent risk warnings.
3. Firms should take particular care when highlighting the absence of a particular risk to ensure that they give a fair and adequate description of the key risks associated with the product.

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