Crackdown on misleading adverts

The FSA is setting up a hotline

Adverts for financial products which bury vital information in the small print are to be targeted by the City watchdog.

The Financial Services Authority is concerned that there is sometimes a lack of balance between the benefits of products and their drawbacks.

And in some cases claims made in adverts could lead to people having unrealistic expectations of investments.

The regulator plans to set up a hotline by the summer so people can report misleading adverts.

"We will be looking very closely at these ads in future and if we have to take enforcement action, we will," says Christine Farnish, the FSA's consumer director.

Awareness

Last year companies spent £1.4bn promoting their financial products.

The FSA says that while most of them abide by the spirit of its rules, it wants to raise public awareness of the standards it sets for advertising.

In a separate move, the FSA wants to strengthen the current rules on the way firms use past performance figures in adverts.

It is proposing that past performance should no longer form part of the prominent message in an advert.

And it should not be presented in a way that links it with the future performance of a product.

Warnings about past performance should be included in the main text of the advert, not buried in the small print.

Losses and gains

And adverts for bond funds should include information on both annual income and long-term income, including losses and gains to the capital invested.

"Our proposals on past performance are designed to ensure that such figures are not viewed in isolation but considered alongside other important factors, such as flexibility, charges and investment strategy," says Christine Farnish.

The watchdog is consulting on proposals to bring these changes into effect.

This is the latest in a series of moves aimed at bringing more transparency to financial dealings.

In February, lenders agreed to change the way they advertised introductory interest rate offers.

This followed pressure from the Office of Fair Trading, which was concerned that describing them as annual percentage rates was confusing to consumers.