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Margaret Cole

It is important that firms are aware of the significant influence financial promotions have on consumers' financial decisions.

FSA/PN/083/2006
25 August 2006  

The Financial Services Authority (FSA) has today fined The Ancient Order of Foresters Friendly Society Limited (Foresters) £55,000 for financial promotions failings including substandard television advertisements and direct offer packs which targeted elderly consumers. This is the first time the FSA has fined a friendly society for financial promotions failings.

The FSA imposed the fine because Foresters failed to promote financial products to consumers in a way that was clear, fair and not misleading. Foresters neglected to ensure that promotion of two of its products, 'Autumn Gold' and the 'TeddyTrust' child trust fund, contained a fair and adequate description of the risks and drawbacks of the product. In addition, the FSA was concerned that Foresters had described its 'Autumn Gold' whole of life insurance policy as a funeral plan in one of its promotions, when it was not a funeral plan.

The seriousness of Foresters' failings was made worse because its target market was elderly consumers whom it did not make aware should seek advice if in doubt about the suitability of the Autumn Gold policy. The failings which occurred over a long period of time (1 January 2004 to June 2005) were discovered as a result of an FSA investigation rather than through Foresters' internal systems or procedures.

Margaret Cole, FSA's Director of Enforcement, said:

"It is important that firms are aware of the significant influence financial promotions have on consumers' financial decisions. It is therefore important that financial promotions clearly explain the benefits and risks of a product in a balanced way to ensure consumers are not misled. Foresters put consumers at risk despite warnings to firms from the FSA on specific areas of financial promotions that needed improvement. Ensuring that financial promotions are clear, fair and not misleading is a responsibility firms should not take lightly and other firms should take heed."

The promotions included television commercials featuring actress Stephanie Cole and television personality Tommy Walsh, which were aired at various times between January 2004 and March 2005. There were also advertisements in magazines and newspapers as well as online promotional material.

In imposing the fine, the FSA recognises the steps being taken by Foresters to ensure its compliance with our rules, its cooperation with the FSA during the investigation, and the remedial action Foresters has taken in relation to Autumn Gold policyholders and will be taking in respect of customers who bought a TeddyTrust product. Were it not for these factors, the penalty imposed would have been higher.

Notes to editors

1. The full text of the Final Notice issued by the FSA, which includes the background to the case, the relevant statutory provisions, regulatory requirements contravened, examples of contravening publications, and the factors taken into account when setting the level of the fine may be found on the FSA website.
2. A link to a video clip of the television commercial can be found in Appendix 2 of the Final Notice.
3. Foresters is a friendly society established in 1834 and authorised under FSMA and has been regulated since 1 December 2001.
4. On 1 August 2006, the FSA published a report detailing its financial promotions work over the last two years, including an evaluation of industry progress and an outline of future plans in this area. The full report is available on the FSA website.
5. Financial penalties are not treated as income by the FSA. They are applied for the benefit of authorised persons (or the issuers of securities admitted to the official list) as appropriate, and so given back to the industry in subsequent years.
6. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
7. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.