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        • Case work examples

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 press advertisement stated in bold, large font letters measuring 4mm at the top of the advertisement, "X% Commercial Property Growth over the last 12 months". The text in the rest of the financial promotion explained the product, and included statements which stated that the performance of the fund had been exceptional. At the bottom of the promotion in small, light font letters measuring 1.5 mm were standard non-specific risk warnings.

We had three main concerns with this promotion:

1. The promotion was leading on the past performance of the fund, by highlighting with significant prominence the x% growth performance over the previous 12 months.
2. The risk warnings were not prominently displayed, as they appeared in a smaller font at the bottom of the promotion, but the text highlighting the perceived advantages of the product was higher up in the promotion, and in large text.
3. The risk warnings were not specific to the type of product being promoted – we published guidance on our website in June 2006 on the factors that firms should take into account when promoting these types of products. In particular, for these types of product, we would expect the promotion to have highlighted that investment in commercial property funds tends to be illiquid and may have deferred redemptions periods, or other delays, that may be associated with selling the product. In addition, the fund invested in properties in Europe, however the risks of foreign currency fluctuation were not mentioned in the promotion. Finally, the performance of the fund was not clearly distinguished from the performance of the property market as a whole, as outlined in our guidance.

Action taken

In response to our concerns, the firm agreed not to use these promotions in the future, and agreed to ensure that all future promotions were approved by an external compliance consultant. In light of the fact that the promotion did not generate any sales, we did not take any further action against the firm.

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