FSA to widen naming and shaming

Consumer groups are urging the Financial Services Authority to do more naming and shaming of companies that produce misleading promotions for products.
Which?, the consumer lobby, says it is in the public's interest to make these companies known.
Which? says there should be more public censuring, instead of private warnings, for companies that break the rules on financial promotions.
The FSA has just said it has acted against a number of companies in the past nine months, and this has led to fines or other enforcement procedures. These moves followed an examination by the regulator of promotional material on websites, television and radio, as well as on direct mail offerings, branch leaflets and promotions for guaranteed equity bonds.
The crackdown coincides with a separate announcement from the City watchdog that it would probe the recently regulated mortgage industry, including mainstream lenders, equity release providers and debt consolidation lenders and brokers for possible regulation breaches.
The FSA - which set up its financial promotions unit less than 12 months ago - says: "We want firms to consider whether... promotions provide a balanced picture of the product or
'Promotions need to be clear, fair and not misleading, says the FSA
service; whether the marketing matches what the product or service delivers."
"Promotions need to be clear, fair and not misleading, as otherwise they may do no more than promote misunderstanding."
The FSA will also look at products in the general insurance industry which it believes are high-risk, such as those targeted
at "vulnerable" consumers who may be sold cover they don't need or can't afford.
Material produced by some Child Trust Fund providers will also be examined where there are concerns about the inadequacy of product descriptions and risks to capital not being made clear.
A common breach is the use of the FSA logo on company web-sites without permission. Some investment companies have been found not to be indicating clearly what their product or service is, leaving many consumers confused about what they are buying or the possible risks involved.
One of the most serious breaches was by Axa Sun Life, which was publicly censured and fined £500,000 for misleading promotions that gave little prominence to key information about product risks.
Cantor Index was fined £70,000 for running a misleading campaign about spread betting. Hem-scott Investment Analysis was fined £50,000 for a misleading promotion that used the slogan: "We even make a bear market soft and cuddly".
The FSA comments: "As the recent disciplinary action against Axa, Cantor and Hemscott illustrates, real issues remain with firms' systems and controls, and recent monitoring has shown that there is much to do in encouraging some firms to comply with our rules."
The FSA is not required to censure publicly every company that breaches its regulations, but it
can issue "private warnings" and other disciplinary actions.
Of the investigations it has concluded, it has asked 44 companies to amend promotions. A further eight have been asked to contact customers who have bought their products and to offer them the chance to withdraw at no cost if they think they have been misled. No further action has been taken in 64 cases.
Which? says that, while it is pleased that the FSA is setting its sights on the mortgage and insurance industries, it would like to see more public censuring of companies that flout the rules.
“A firm will change its behaviour if it is getting bad publicity,” says Laurence Baxter, a senior policy office with Which? “Brand reputation is a vital stimulus, and naming and shaming is a significant aspect of this”.

The FSA defends its policy on censure, saying it has to balance the nature of the breach against the damage that extensive publicity could do to a company.
The FSA is also soon to launch a new section on its website giving regular updated on the results of new and continuing investigations. Its aims to release information about its current investigations in the first half of this year.