Regulator spikes more than 200 financial promotions in a year

Bovill said that 204 financial promotions were amended or withdrawn at the behest of the FCA in the year up to 30 June and anticipated that the regulator would "be getting ever more pro-active in policing" the rules on financial promotions.

"If it thinks firms have overstepped the rules, it will be quick to intervene," Bovill's head of wealth management Mark Spiers said. "The FCA is most concerned that promotions give as much prominence to the risks of an investment as its potential returns."

Bovill said that common problems with financial promotions are that they contain "excessive investment jargon" that can confuse consumers, or where text containing warning statements is displayed in type that is too small and is "difficult to read". A lack of clear, written explanation about the risks to client capital inherent in a product or service is another typical failing, it said.

Bovill said that another common fault is where promotions state a yield figure for a product that fails to provide "a balanced impression of both the short and long term prospects for the investment". Some adverts also claim that features of a product or service are 'guaranteed', 'protected', or 'secure' without the basis for such claims being detailed, it added.

An increasing number of companies are concerned about ensuring their social media activities do not breach the rules on financial promotions, Bovill said.

"Forward-thinking financial services firms are using social networks like Twitter, LinkedIn or even Facebook to market their products or brand," Spiers said. "The decentralised nature of how social media is used by some firms makes it harder for the firm to manage and control what their staff are doing on social networks than traditional channels. This risks landing them in hot water with the regulator if their staff fall foul of the financial promotions rules."

The fact that the FCA can "publically rebuke" companies that breach the financial promotions rules without first having to inform them means that businesses are under increased pressure to achieve compliance, Spiers added.

"Under the FSA regime, if a firm was found to have violated the guidelines, the FSA had to write to them privately with concerns over a promotion, whereas the FCA can chastise them publicly without having to jump through the hoop of warning them privately first," he said. "Firms are now more nervous of making mistakes because of the potential damage to them of making a mistake."

In September last year the then City regulator, the Financial Services Authority, said it had seen "examples where the customer's best interest is not at the heart of digital promotions". It called on businesses to ensure promotional material is "fair, clear and not misleading", in line with the rules which also require firms to disclose information, including about risks to investing in products, to allow consumers to make an informed choice about whether to buy the product.

At the time Clive Gordon, head of the conduct risk department at the FSA, said that businesses should be aware of space constraints inherent in Twitter advertising. He said the companies should not run financial promotions where the space constraints prevent them from displaying "balanced and sufficient information".

"As Twitter limits the number of characters used to 140, a bank, for instance, would want to ensure that it has robust policies in place which seek to prevent staff from failing to provide sufficient product information to customers to enable them to make informed choices where required to do so," technology law specialist Luke Scanlon of Pinsent Masons, the law firm behind Out-Law.com, said late last year after Virgin Media Business revealed that 63% of banks respond to customer complaints made via Twitter within an hour.

"It would also want to mitigate the risk of creating unrealistic impressions of the benefits of its services which could be a consequence of the limitations imposed on the amount of characters that can be used and otherwise ensure that it is presenting information in a manner that does not mislead customers," he added.