Review of outdoor financial promotions - June 2009
We have recently carried out a review of outdoor financial promotions to assess their level of compliance with our financial promotions rules and guidance. It is estimated that around 87% of UK adults see an example of outdoor advertising every week. Firms use outdoor advertising because of its high visibility, impact and exposure to a large volume and broad cross-section of potential consumers. Our review was motivated by this and the fact that the financial services sector was the third highest spender on outdoor advertising in 2008, after a 33% increase on the previous year.1
We recognise that this medium can pose particular problems for firms' compliance and marketing departments. However, all outdoor promotions must satisfy our overarching requirement of being fair, clear and not misleading. We reviewed promotions for products that fall within the remit of the relevant chapters governing financial promotions in the Conduct of Business Sourcebook (COBS4), the Insurance Conduct of Business Sourcebook (ICOBS2.2.) and the Mortgages and Home Finance Conduct of Business sourcebook (MCOB3).
The review
We defined outdoor financial promotions as billboards, posters (including digital video displays) and advertisements appearing on ticket barriers, train carriages, taxis and buses. Our review did not include in-branch promotions or posters appearing in windows. We assessed 82 different outdoor promotions issued by 43 different firms by means of a desk-based review to ensure broad national coverage and an ‘on site’ review of a selection of key locations in London.2
What we found
- We were generally satisfied with the level of compliance achieved by the majority of the outdoor promotions we reviewed.
- Some firms appeared to have difficulty in determining whether promotions (particularly for investment products) were exempt from the detailed financial promotion rules.
- Firms did not always provide the capital-at-risk or past performance risk warnings that were required to ensure their outdoor promotions were compliant.
- Some firms marketing high-risk products assumed a relatively sophisticated target audience for their promotions, despite the outdoor advertising medium being inherently unable to target a specific audience.
Exempt promotions
We considered many of the promotions that we assessed to be exempt from the detailed financial promotion requirements because they were not invitations or inducements to engage in investment activity. However, we did see some examples where firms had incorrectly presumed this to be the case. If an advertisement is not a financial promotion then it is not subject to the detailed financial promotions rules. Advertisements that may fall into this category might simply be raising awareness of the firm without inviting or inducing the consumer to take any action, or without promoting the benefits of a particular product. Firms should bear in mind, however, that any communications to retail clients, whether or not they are financial promotions, are still subject to the clear, fair and not misleading principle (Principle 7) and to the rules applicable to client communications.
Image advertising
We encountered some cases where firms considered their promotions to be ‘image advertising’ and exempt from our financial promotions rules, but we deemed this to not be the case. The treatment of image advertising varies depending on which sourcebook applies.
- Investment products: ‘Image advertising’ is exempt from most of the detailed financial promotions rules and guidance in COBS4, but will still need to comply with the high-level fair, clear and not misleading rule.3 For clarification, firms should be aware that the Glossary definition of ‘image advertising’ as it relates to COBS4 is not the same as the exemption that formerly existed under COB3. When a communication goes beyond this definition in any way, it is not image advertising and needs to comply with all the relevant financial promotions rules.
- Mortgage products: MCOB3 contains a specific exemption for ‘image advertising’ or ‘brand advertising’, which is set out in MCOB3.2.5R(2). Where a communication goes beyond this definition in any way, it cannot rely on the exemption and would need to comply with all the relevant financial promotions rules.
- Insurance products: There is no equivalent provision relating to ‘image’ or ‘brand’ advertising in ICOBS 2.2 and firms cannot rely on the exemption in relation to promotions for insurance products.
Target audience and stand-alone compliance
One of the attractions of outdoor promotions is that they can achieve good ‘saturation coverage’ of a wide retail audience. This poses certain compliance challenges because firms are usually unable to target their promotions at a specific audience. As a result, we expect outdoor promotions not to assume a particular level of sophistication, but to be designed to be understood by the majority of the general population.
Even though it is not possible to buy directly from outdoor promotions, they can still be an important first stage towards consumers making financial choices and need to be stand-alone compliant. It is not acceptable for firms to promote only the benefits of a product because they intend to give important risk information later in the sales process.
Sector specific issues
Investments (COBS4)
Capital at risk and balance
We identified a number of outdoor promotions that did not contain relevant risk warnings when they were required. Our ‘fair, clear and not misleading’ high-level rule is informed by guidance that firms should ensure that a financial promotion for a product or service that places a client's capital at risk makes this clear.4 In addition, any communication or financial promotion that is addressed to, or disseminated in such a way that it is likely to be received by, a retail client is governed by more detailed rules. One of these is that firms must ensure information is accurate and, in particular, does not emphasise any potential benefits of relevant business or a relevant investment without also giving a fair and prominent indication of any relevant risks.5
Past-performance
Some promotions failed to include a past-performance risk warning alongside past-performance information. COBS 4.6.2R states that such a warning should be included where a promotion contains an indication of the past performance of any relevant business, a relevant investment or a financial index. This encompasses much more than figures and data and can include, for example, the past performance of a fund’s manager, because a person’s performance in managing investments is a controlled activity, which is relevant business.
Insurance (ICOBS 2.2)
Price-saving claims
The main area of non-compliance we identified for insurance promotions was that some posters contained out-of-date information substantiating price-saving claims. Firms should be able to satisfy themselves that data they use on promotions is up-to-date and relevant. We expect firms to have controls in place to ensure that where there is a risk of out-of-date information causing a promotion to be unfair, unclear or misleading, they are able to locate and remove these promotions before this becomes the case.
Examples of good and poor practice
Good practice
- Risk warnings were clearly displayed within the main body of the promotion and tailored to the specific product where appropriate.
- Information was sufficient and up-to-date.
- Headline claims were clearly and prominently substantiated, allowing consumers to make an informed decision.
Poor practice
- Risk warnings and important information were not sufficiently prominent and appeared at the bottom of the promotion, outside the main body, or were omitted entirely.
- Firms relied on subsequent communications to provide key information.
- Firms had not given due consideration when signing off promotions about whether the exemptions they had relied upon were available.
- Posters remained in place when information was out-of-date, leading to them being potentially misleading.
Next steps
We have written to firms where we had concerns with their outdoor financial promotions. We expect all firms to review their outdoor promotions in order to satisfy themselves that they meet our requirements and, in particular, whether they are subject to our financial promotion rules. We expect firms to take prompt action to address any shortcomings in compliance that they identify.
1 Source: The Outdoor Advertising Association - (http://www.oaa.org.uk/)
2 Key Locations included: Several mainline railway stations; Lewisham station; Oxford Street; Canary Wharf; Stratford station.
3 COBS 4.2.1R - (http://fsahandbook.info/FSA/html/handbook/COBS/4/2)
4 COBS 4.2.1R (http://fsahandbook.info/FSA/html/handbook/COBS/4/2) and COBS 4.2.4G(1) (http://fsahandbook.info/FSA/html/handbook/COBS/4/2) respectively.
5 COBS 4.5.4R(2) - (http://fsahandbook.info/FSA/html/handbook/COBS/4/5)