"Cherry-picked" data is now a thing of the past, says FSA

To prevent firms selectively using data to present their past performance in a flattering light, standardised data must now be included in advertisements referring to past performance.

Under the new rules:

• Where past performance information is used in advertisements, it must be accompanied by standardised data, set out in a table, showing discrete annual returns for the previous five years. These figures must be expressed as a percentage and will give consumers a better understanding of the volatility of the investment and how it has performed over a period of time.

• Where less than five years performance is available, then a firm should give information for as many 12-month periods as possible, updated to the previous quarter. Firms should indicate (using dashes or an explanation) where there is no information available for the 'missing years.'

• Where data is available for less than one twelve month period, past performance information may not be included. This is because a period of less than a year will not give a 'clear, fair and not misleading' impression of longer term performance. However, this information will still be available to intermediaries and professionals because only advertisements aimed at retail investors are covered by the FSA's advertising rules.

The standardisation measures form part of an overall package aimed at improving the way in which past performance information is used in advertising. Other elements of the package include:

• improving the balance in advertisements by reducing the emphasis on past performance;

• strengthening the warning so that it appears in the main body of the advertisement, not buried in the small print; and

• preventing firms from making a link between past performance and the future.

Final rules and guidance were published in Policy Statement 183 Standardising Past Performance: feedback on CP183 in December 2003.

Notes for editors

1. These rules are not appropriate for products that are not collective investment schemes or unit linked products, and do not have a fixed term. For these products, the existing format of 5 years of cumulative performance should be used.

2. 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 of consumers; and fighting financial crime.

3. The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.