After receiving inquiries from the FSA, City insurers, financial advisers and banks withdrew 262 promotions in 2010. This was up 32% from 199 in 2009, according to a freedom of information request by City law firm Reynolds Porter Chamberlain
The increase continued in the first quarter of 2011, with 66 withdrawn promotions, compared to 50 for the same period in 2010, the Financial Times reports.
“They have certainly stepped up their activity over the last few years. It is clear the FSA is becoming a more intrusive regulator and it wants to intervene earlier,” said Jonathan Davies, an RPC partner.
RPC explained the rules require firms to give as much prominence to the risks of the financial products as they do to the potential returns.
Davies said: “Giving equal prominence to risks and rewards is a very judgemental concept, on which reasonable people can easily disagree. The FSA is increasingly forcing its view on firms. In future, a firm which disagrees with the FCA, which will be regulating this area once the FSA is replaced, will be named and shamed before the disagreement can be resolved by an independent tribunal.
“Businesses will be particularly concerned about the naming and shaming powers the FCA will have because the reputational damage that could follow a disagreement with the FCA will be very high indeed.”
The FSA has fined 14 firms more than £1.5m since 2004 for promotions breaches. It proposed new rules for financial promotions in July emphasising the need for prominent risk warnings for retail products.
