ASA Adjudication on Stanley Gibbons Ltd
Stanley Gibbons Ltd
25 April 2012
Number of complaints:
Summary of Council decision:
Three issues were investigated of which two were Not upheld and one was Upheld.
A press ad for a stamp investment product published in the Financial Times in October 2011 stated "Worried about where to put your savings nowadays? Our Capital Protected Growth Plan* is designed to protect your investment 100% whilst at the same time allowing unlimited growth. We do this by investing in a tangible, historical asset with a 100 year history of strong and steady increases. This asset class may surprise you, but its track record largely speaks for itself. Our confidence in its performance also allows us to offer you a full capital security guarantee* - we will guarantee the sum you choose to invest with us, whatever happens to the value of your portfolio".
Underneath a picture of a stamp, further text stated "2001 Sold for £20,000" and "2011 Sold for £100,000".
Text beneath this stated "Download your helpful, free 16 page guide at [website] or contact us ...".
Small print stated "* Capital security means that we guarantee the sum you choose to invest with us; if the value of your portfolio should fall at the end of your investment term, we will still return your original invested sum to you. Historically, the rare stamp market has performed very strongly and continues to do so. Please note, however, that your investment is not guaranteed or underwritten by any third party. For more information please visit our website ... As per the GB30 Rarities Index as listed on Bloomberg Professional. Stamps and certain other collectibles are not designated investments for the purposes of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 and as such are not subject to regulation by the Financial Services Authority (FSA) or otherwise".
Which? challenged whether the following claims were misleading and could be substantiated:
1. the product "is designed to protect your investment 100%";
2. "Our confidence in its performance also allows us to offer you a full capital security guarantee - we will guarantee the sum you choose to invest with us, whatever happens to the value of your portfolio"; and
3. "We do this by investing in a ... historical asset with a 100 year history of strong and steady increases.
CAP Code (Edition 12)
1. Stanley Gibbons (Guernsey) Ltd responded to say that under their contract, a client could choose from seven options at the end of the contract period. One of these options was to sell all the Stamps to Stanley Gibbons (except any already sold under clause 4.1 (Early termination option)) at a price equal to their Purchase Price. As a result of this option the client's investment was contractually protected so that he/she would receive as a minimum the return of 100% of his/her capital at the end of the contract period. The client received full contractual documentation prior to purchase and had full rights to cancel for any reason if they were not satisfied. Documentation supplied to the client on purchase included a copy of this contract signed by the Company.
2. Stanley Gibbons said that, as explained in Point 1, the investment was not guaranteed or underwritten by any third party and the investment was secured by a legal contract. They said that the Stanley Gibbons Group Plc was a public company quoted on the London Stock Exchange (AIM) and that its market capitalisation was currently over £42 million. Stanley Gibbons, was a fully owned subsidiary of the parent company. They said it was run on a conservative basis by its Directors and had limited annual subscription levels, sales of which would be withdrawn in the event that these levels were reached.
They stated that Stanley Gibbons was outside the authority of the FSA and acknowledged that stamps are not 'controlled investments' for the purposes of the Protection of Investors (Bailiwick of Guernsey) Law, 1987 (as amended) and as such were not subject to regulation by the Guernsey Financial Services Authority (GFSC). However, they said that they had registered with the GFSC under the Registration of Non-Regulated Financial Services Businesses (Bailiwick of Guernsey) Law, 2008 (as amended) as a financial services business and therefore was regulated by the GFSC in respect of Anti-Money Laundering and Countering Financial Crime and Terrorist Financing Matters.
They were not aware that, because the product was unregulated, this precluded a conservatively run and financially secure company from offering a guarantee to its clients based on a contract drawn up by a leading firm of solicitors. They said that they had been offering this, and similar products since 2005 and had never failed to pay a client what they had been due and did not therefore consider that the ad was misleading.
Stanley Gibbons said that in the unlikely event of bankruptcy, customers would be able to keep their stamps but investors would not have preferred creditor status to reimburse them if the value of their stamps had decreased since the initial investment.
3. Stanley Gibbons said that their business was established in 1856 and had published its first catalogue of stamp prices in 1865. They had done so annually ever since. The latest edition of Stamps of the World contained prices for over half a million stamps. In 2005 Stanley Gibbons published the SG GB30 GB Rarities Index plus other indices covering British Commonwealth rarities, etc. These indices had been reviewed by Bloomberg for accuracy and published on the Bloomberg Professional website.
They said that the Capital Protected Growth Plan was a long-term product, with a standard contract period of five or ten years. They included a spreadsheet of the GB30 Rarities Index tracked back to 1954, for the ASA's reference. They said that as with any market, be it bonds, houses, gold or rare stamps, prices did fluctuate and they accepted that there was a decline in prices from 1979 to the early 1980s. However, they said that the decline tended to affect stamps at the lower end of the quality/rarity spectrum and they would not recommend that this type of material was included in a Growth Plan portfolio. Additionally, because it was a long-term contract, short-term fluctuations did not have a significant effect on long-term performance. They said that they did not think it possible to view the performance of the GB30 Rarities Index and not agree that it demonstrated a 'history of strong and steady increases'.
1. & 2. Not upheld
The ASA noted from Stanley Gibbons' response that both their assurance to offer customers 100% protection of their investment and their "full capital security guarantee" were secured by a legal contract drawn up by their own solicitors and were not underwritten by third parties, for example a statutory scheme.
We noted, however, that the small print at the bottom of the ad stated "your investment is not guaranteed or underwritten by any third party ... Stamps and certain other collectibles are not designated investments for the purposes of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 and as such are not subject to regulation by the Financial Services Authority (FSA) or otherwise". We therefore considered that it would be clear to readers that any investment with Stanley Gibbons was underwritten by them alone and was dependent upon their continuing solvency. We therefore concluded that on both these points, the ad was not misleading.
On points 1. & 2. we investigated the ad under CAP Code (Edition 12) rules 3.1 and 3.3 (Misleading advertising), 3.7 (Substantiation), 3.9 (Qualification), 14.1 and 14.4 (Financial products) but did not find it in breach.
We noted Stanley Gibbons' response that the claim "historical asset with a 100 year history of strong and steady increases" referred to the kinds of stamps they would advise customers to invest in as per their own GB30 Rarities Index, not stamps in general. However, we noted that Stanley Gibbons only supplied us with an overview of prices from this index from the years 1911, 1954 and then annually from 1998 to 2011. We also noted that Stanley Gibbons acknowledged in their response that prices of stamps had fluctuated and that there had been a decline in the price of stamps from 1979 to the early 1980s but they did not supply us with data from this period to compare. Taking all of this into account, we concluded that we had not seen adequate evidence to substantiate the claim and on this point, the ad was misleading.
On this point, the ad breached CAP Code (Edition 12) rule 3.1 (Misleading advertising) and 3.7 (Substantiation).
We told Stanley Gibbons not to claim that their stamps had a 100 year history of strong and steady increases.