Signing off financial promotions with finesse

financial promotions
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The UK’s financial promotions regime saw some significant changes in the past year, including the introduction of a regulatory gateway for approvers of third-party financial promotions.  The emphasis on financial promotions isn’t new.  In recent years, we’ve seen the UK’s FCA using TV commercials to raise awareness of scams and misleading advertisements.
It's a recurring theme for various regulators whether you’re based in the UK, EU or further afield.  In the UK, we’ve been discussing consumer duty for some time, but other regulatory regimes including MiFID require investor protections too, as well as the highlighting of risk warnings or, in the case of SFRD (SDR), ensuring that green products are labelled correctly.  The message is clear: regardless of where you do business, your marketing processes need to be robust.

In October 2023, MEPs approved legislation to protect consumers from misleading financial promotions.  This law provides improved protection for those consumers who are not currently protected by sectoral regulations such as consumer credit and mortgages.  The law focuses on distance contracts, for example, products or services bought online.    

The EU requirements centre around:

  • Pre-contractual information including the consumer’s right to cancel, charges for pre-withdrawal services, adequate explanations, and the right to human intervention
  • Obligation to provide 23 key pieces of information such as instructions on how to cancel a service or product
  • Informing the consumer if their call is being recorded
  • Where a consumer cancels a service, firms can only request payment if the service was actually provided. Resulting in firms being obliged to return undue payments no later than 30 calendar days after the cancellation.  Likewise, consumers too must return any money they may have received from a trader in the same period.
The requirements seek to protect consumers from manipulative online behaviour.
EU member states have 24 months from the adoption of the law to transpose the requirements into national law and an additional 6 months to implement the changes.
In 2023, Singapore's MAS closed its consultation on Enhancing Safeguards for Proper Conduct of Prospecting Activities at Public Places and Telemarketing.  This paper relates to the remote marketing and distribution of products and services.
MAS sought feedback on its proposals to address the following issues: 
  • failing to be transparent about their identities and motive when contacting consumers
  • engaging in pressure selling and other poor sales practices, including offering gifts to unduly influence customers’ purchase decisions; and
  • harassing consumers or being overly persistent in getting them to purchase financial products.
The regulator is concerned about complaints it received relating to life insurance and long-term accident and health policies.  Not surprisingly, the proposals included extending current marketing legislation to include these products, whilst guidelines for banking and other insurance products remain in place.
How does this affect you?

Depending on the regulated activities that a firm performs, and the products and services delivered, there are a myriad of local and international rules which continue to baffle some firms.

Every time we have a new regime implemented, or reviewed, or another scam highlighted by the regulators, it results in firms needing to reassess what they’re doing and make improvements.  More fines results in greater regulatory focus, and the bar is raised to improve overall standards.
What are the challenges?

The FCA’s research has highlighted some fundamental issues, which resulted in the changes to the UK’s financial promotions regime. 

 The findings included the following: 
  • materials slipping through the net
  • failure to understand who should review and approve their materials
  • failing to realise that firms need to comply with regulations
  • failing to gather evidence to demonstrate the materials were reviewed and approved, and completed by a competent person
  • failing to appoint a competent person to review and approve financial promotion
Think beyond your firm!

If we consider some of the regulatory regimes that impact investment services or banking.  These firms rarely work in isolation.  They’re usually part of a distribution chain and may be selling products at home and abroad.  They may use their own group entities to market their services or engage third parties.  Regardless of the arrangements, firms need to track the rules that relate not just to the firm, but to the product or services being marketed. 

Firms must continue to ensure that marketing communications:
  • are identified as financial promotions,
  • describe both the risk and rewards prominently, and
  • contain clear, fair and not misleading information.
Whilst the legislation might differ across regions or countries, the afore-mentioned regional regulations highlight the need for firms to:
  • maintain oversight of their representatives, whether that’s appointed representatives, agents, or distributors
  • understand their marketing and sales processes,
  • consider whether these third parties meet the standards required to demonstrate compliance with your obligations
Take action to reduce your regulatory risk:

Take a moment to consider the following steps; how do you currently demonstrate the following?

  • Robust review process
  • Ensuring accountability & competence of the Approver of financial promotions
  • Demonstrating a comprehensive audit trail as well as appropriate sign off
  • Improving due diligence on non-authorised firms, and
  • Ongoing oversight of inhouse marketing and sales, and third parties
Few people intentionally set out to mislead consumers.  Some take misguided steps by failing to follow business policy because they don’t understand the repercussions or, in some cases, due to pressure from above.  When there’s an opportunity to do something and no one is watching… things can go wrong. How do you protect your firm?

Firms need to reinforce their stance and be proactive where they discover failings.  Failure to act reinforces the wrong behaviour and sets a standard that if unchecked could become the new norm. With the right level of oversight, you can improve your firm’s culture and standards to support and demonstrate compliance with the requirements.

How Ruleguard can assist:

Ruleguard is an industry-leading GRC software platform designed to help regulated firms manage the burden of evidencing and monitoring compliance. It has a range of tools to help firms fulfil their obligations across the UK, Europe and APAC regions.

The Ruleguard Financial Promotions solution allows firms to:

  • manage and oversee their financial promotions in the context of the underlying regulations and relevant standards
  • use configurable workflow tools to manage each stage of their promotions review process
  • gather assurance data points that procedures are being followed as intended, and
  • store and access supporting evidence to quickly answer queries for oversight and audit purposes.

If you’d like to learn more about the Ruleguard Financial Promotions Solution, please contact us for further information on:

Tel: 020 3965 2166 or hello@ruleguard.com

Financial Promotions 

Ruleguard hosts regular events on a variety of regulatory topics. If you missed our webinar about Financial Promotions, you can still view it on demand.  

To register your interest or learn more about our 2023 events, please click here.
White papers: 
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Request a complimentary copy of our White Paper: A Guide to FCA Strategy: 2022-2025 click here. 

Further resources:

See our blog page for further articles or contact us via hello@ruleguard.com.

Visit our website to find out more about how Ruleguard can help: https://www.ruleguard.com/platform

Contact the author
Head of Risk & Compliance| Ruleguard