SECTION 9: FINANCE AND INVESTMENT

Background:

(1) The rules in this Section largely draw attention to statutory regulation with which all advertising must comply. However, selecting the most appropriate financial products or services normally requires consumers to consider many factors and television advertising is not well suited to communicating large amounts of detail. It is not, therefore, an appropriate medium for advertising some particularly high risk or specialist investments or any financial products or services that are not regulated or otherwise permitted in the UK under FSMA.

(2) The Financial Services and Markets Act 2000 (FSMA) unifies much of the structure of financial regulation in the UK by replacing previous legislation and merging existing regulators into the Financial Services Authority (FSA).

(3) The FSA is the regulator for the financial services industry and regulates conduct of business, including advertising, for investment products.  It also regulates the advertising of insurance, including the activities of insurance intermediaries (e.g. motor, home and travel insurers).

(4) The FSA is responsible for the regulation of most first charge mortgage lending and selling. Mortgages that are not regulated are those secured on non-UK land, business premises with less than 40% residential occupation, and second charge mortgages.  The FSA's Financial promotion rules set out in Mortgage Conduct of Business Chapter 3 (MCOB 3) in the FSA Handbook apply to qualifying credit promotions as defined under the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (FPO) and the FSA Handbook glossary.

(5) Unsecured lending, other forms of secured lending and some other credit activities continue to be regulated by the Consumer Credit Act 1974 (as amended) and the Consumer Credit (Advertisements) Regulations 2004..

(6) In this Section, unless otherwise stated, the terms ‘financial promotion’, ‘authorised person’ and ‘qualifying credit promotion' have the same meanings as in the FSMA and the FPO. Please note that the definition of a financial promotion is broad and includes, for example, advertising for deposits and insurance products. 

9.1 Non-UK advertising

Advertisements for financial services which:

(a) are broadcast on Ofcom-licensed services that are aimed exclusively at audiences in EU Member States other than the UK and

(b) are not subject to the financial promotion rules of the FSA

need not comply with Section 9. Instead they must comply with the laws and regulations of the relevant Member States

9.2 Legal responsibility

Financial promotions must comply with all legal and regulatory requirements

Notes:

(1) To quote the FSMA, a Financial Promotion is ‘an inducement or invitation to engage in investment activity, which is communicated in the course of business’. It is, however, important also to refer to the FSA Handbook, in particular to the rules in Conduct of Business Chapter 3 (COB 3), MCOB 3 and Insurance Conduct of Business Chapter 3 (ICOB 3).

(2) Legal advice, or general advice from the FSA, may be required concerning compliance with FSMA requirements.  Please note that the FSA does not pre-vet promotions.

9.3 Misleading advertising

Background:

The ASA and BCAP will apply their usual standards to prevent misleading advertising (see sections 5) and require any significant exceptions and qualifications to be made clear (see rule 5.2.3). In addition, Financial Promotions must be "clear, fair and not misleading" as required by the FSA Handbook.  Where appropriate, the ASA and BCAP will seek advice from other regulators when investigating possible breaches of the rules in Section 9.

Unless advertisements subject to Section 9 are clearly addressed to a specialist audience and shown either on specialised financial channels or in breaks within appropriate financial programming, they must be considered to be addressing non-specialist audiences

Note:

No specialist knowledge should normally be required for a clear understanding of claims or references. For example, exceptions, conditions or expressions which would be understood by finance specialists must be avoided or explained if they would be unfamiliar to many viewers.

9.4 Direct remittance

Financial promotions must not invite the direct remittance of money

Notes:

(1) It must not be possible to buy ‘off the screen’ without further formality. There must always be an intermediate stage in which further information is supplied.

(2) See the BCAP Code for Text Services for exceptions to the rule for Ofcom-regulated text services.

9.5 Unacceptable categories

(a) Except on specialised financial channels, the following categories of advertising are not acceptable:

(1) advertisements for the issue of shares or debentures. Exceptions are made for advertisements announcing the publication of listing particulars or a prospectus in connection with an offer of shares or debentures to be listed on the London Stock Exchange or prospectuses approved for the purposes of the Prospectus Directive 2003/71/EC and permitted under FSMA.

(2) advertisements recommending the acquisition or disposal of an investment in any specific company other than an investment trust company listed on the London Stock Exchange

(b) Spread betting may be advertised as an investment on specialised financial channels or in specialised financial programming or on interactive or additional TV services (including text services) only. Spread betting advertisements must comply with the gambling rules (see rule 11.10).

(c) Nothing may be advertised as an investment unless it is regulated or otherwise permitted under FSMA.

Notes to 9.5:

(1) Advertisements for Contracts for Differences (except Spread Betting) are acceptable on specialist financial channels provided the products are available only to clients who have demonstrated through appropriate pre-vetting procedure that they have relevant financial trading experience.

(2) For this purpose, a "specialised financial channel" is an Ofcom licensed channel whose programmes, with few exceptions, are likely to be of particular interest only to business people or finance professionals.  “Specialised financial programming” is programming that is likely to be of particular interest only to business people or finance professionals.

(2) In this Code, "Spread Betting" and "Contract for Differences" have the same meanings as in the glossary to the FSA Handbook.

Note to 9.5(c): Any advertising which implies that, for example, a collectors’ item or some other unregulated product or service could have investment potential would normally be unacceptable. (‘Investment’ is used in its colloquial sense in this note.)

9.6 Financial promotions

Subject to 9.5(a), financial promotions are acceptable if:

(a) they have been approved by an ‘authorised person’ as defined in the FSMA or

(b) they are exempt as set out in COB 3.2.5R, MCOB 3.2.5R and ICOB 3.3.6R

Note to 9.6:

Advertising by a general insurance intermediary need not be approved by an authorised person if it is a generic promotion under the FPO. (This is usually where the advertising does not identify any particular insurer, insurance intermediary or product, so it will usually apply where the financial promotion refers generally to product types).

9.7 Savings and deposits

(a) References to interest on savings must be accurate at the time of transmission and the advertising must be modified immediately if the rate changes

(b) Calculations of interest must not be based on significant unstated factors

Note to 9.7():

It may be necessary to refer to factors such as a minimum deposit, minimum deposit period or minimum period of notice for withdrawal.

(c) Advertisements must make clear whether interest is gross or net of tax

(d) Where the interest rate is variable, this must be stated

(e) Where the investment returns of savings products are compared (eg a unit trust is compared with a bank deposit) any significant differences between the products must be explained

(f) Advertisements subject to Section 9 must comply with Code of Conduct on the Advertising of Interest Bearing Accounts which is published jointly by the Building Societies Association and the British Bankers’ Association

9.8 Lending and credit

The advertising of most credit or hire services is acceptable only where the advertiser complies with the Consumer Credit (Advertisements) Regulations 2004 and the Consumer Credit Act 1974 (as amended).  The advertising of mortgages regulated by the FSA and secured loans of FSA regulated lenders is only acceptable where the advertiser complies with the FSMA and the FSA Handbook.

Notes:

(1) Credit advertisements that are not qualifying credit promotions must comply with Section 46 of the Consumer Credit Act and Regulations made under it. Where there is doubt about their applicability or interpretation, advice should be sought from the appropriate Trading Standards Department.  Such advertisements that involve distance marketing must also comply with the Financial Services (Distance Marketing) Regulations 2004.  Other financial advertisements that are distance marketed will be covered by the FSA Handbook.

(2) Please note the Guidance for Debt Management Companies and other guidance issued by the Director General of Fair Trading.

9.9 Financial publications

Advertisements for publications (whether electronic or on paper) must make no recommendations about specific investments.