Firms are struggling to stick to the rules when it comes to marketing their products leading the Financial Conduct Authority to force some to amend or withdraw their advertisements.
Research from Bovil, the financial services regulatory consultancy, revealed that 204 financial promotions have been amended or withdrawn in the last year to 30 June 2013.
Mark Spiers, head of wealth management at Bovill, said: “We are expecting the regulator to be getting ever more pro-active in policing the financial promotion rules. If it thinks firms have overstepped the rules it will be quick to intervene.”
Typical failings highlighted by the research were the excessive use of investment jargon, font sizes for warning statements being too small and difficult to read and when promotional advertisements describe a feature as guaranteed, protected or secure with nothing to confirm this.
Social media has added to the challenges facing firms which choose to use the medium to promote their products.
Businesses are worried about making sure their social media policies and practices meet the financial promotions rules.
Spiers said: “Forward-thinking financial services firms are using social networks like Twitter, LinkedIn or even Facebook to market their products or brand.
“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 FCA’s focus on conduct risk means it will be applying more intense scrutiny to firms’ financial promotions.
Spiers added that the new FCA powers allowing it to publicly rebuke firms for getting the financial promotions rules wrong without having to inform them privately first has heaped more pressure on firms.
He said: “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.
“Firms are now more nervous of making mistakes because of the potential damage to them of making a mistake.”