CRED 11.2 Financial promotion

Financial promotion is defined as an invitation or inducement to engage in investment activity.1

Financial promotions can be real time or non-real time. A real time financial promotion is communicated in the course of a personal visit, telephone conversation or interactive dialogue. A non-real time financial promotion is not a real time financial promotion. It includes a financial promotion made by letter, e-mail or contained in a newspaper, journal, magazine, other periodical publication, website, television or radio programme or teletext service.

Where a financial promotion relates to a deposit (other than a cash deposit ISA) only certain parts of COB 3 apply. These are COB 3.1COB 3.5 and COB 3.8.4 R to COB 3.8.6 G and COB 3.14.

In addition to the limited application of COB 3, a number of exemptions from the rules and guidance on financial promotions are listed in COB 3.2.5 R. Some exemptions are particularly relevant to credit unions namely exemptions (2), (4) and (5):

1. (1)

   Exemption (2): A financial promotion which can lawfully be communicated by an unauthorised communicator without approval.

2. (2)

   Exemption (4): A "one off" non-real time financial promotion or a "one off" solicited real time financial promotion . If the conditions set out in (a) to (c) are satisfied, a financial promotion is to be regarded as "one off"; if not, the fact that any one or more of these conditions is met is to be taken into account in determining if a financial promotion is "one off", but a financial promotion may be regarded as "one off" even if none of the conditions are met; the conditions are that:

   1. (a)

      the financial promotion is communicated only to one recipient or only to one group of recipients in the expectation that they would engage in any investment activity jointly;

   2. (b)

      the identity of the product or service to which the financial promotion relates has been determined having regard to the particular circumstances of the recipient;

   3. (c)

      the financial promotion is not part of an organised marketing campaign.

3. (3)

   Exemption (5): A financial promotion which contains only one or more of the following:

   1. (a)

      the name of the firm;

   2. (b)

      the name of an investment;

   3. (c)

      a contact point (address including an e-mail address, telephone or facsimile number);

   4. (d)

      a logo;

   5. (e)

      a brief, factual description of the firm's activities;

   6. (f)

      a brief, factual description of the firm's fees;

   7. (g)

      a brief, factual description of the firm'sinvestment products;

   8. (h)

      the price of yield of investments and the charges.

Despite the limited application of COB to deposits and the exemptions mentioned in CRED 11.2.4 G,COB 3.2.8 G(1) reminds firms that financial promotions (including those which are exempt) may be subject to more general rules including Principle 7 (Communications with clients) SYSC 3 (Systems and controls) and COB 2.1.3 R (Clear, fair and not misleading communication)).

The requirement on a firm under COB 3.8.4 R (1) is that it should be able to show that it has taken reasonable steps to ensure that a non-real time financial promotion is clear, fair and not misleading. This is supported by further detailed rules includingan evidential provision COB 3.8.5 E):

1. (1)

   A firm should take reasonable steps to ensure that, for a non-real time financial promotion:

   1. (a)

      its promotional purpose is not in any way disguised or misrepresented;

   2. (b)

      any statement of fact, promise or prediction is clear, fair and not misleading and discloses any relevant assumptions;

   3. (c)

      any statement of opinion is honestly held and, unless consent is impracticable, given with the consent of the person concerned;

   4. (d)

      the facts on which any comparison of contrast is made are verified, or, alternatively, that relevant assumptions are disclosed and that the comparison or contrast is presented in a fair and balanced way, which is not misleading and includes all factors which are relevant to the comparison or contrast;

   5. (e)

      it does not contain any false indications, in particular as to:

      1. (i)

         the firm's independence; or

      2. (ii)

         the firm's resources and scale of activities; or

      3. (iii)

         the scarcity of any investment of service;

   6. (f)

      the design, content or format does not disguise, obscure or diminish the significance of any statement, warning or other matter which the financial promotion is required by this chapter to contain;

   7. (g)

      it does not include any reference to approval by the FSA or any government body, unless such approval has been obtained in writing from the FSA or that body (see also GEN 1.2 (Referring to approval by the FSA));

   8. (h)

      it does not omit any matters the omission of which causes the financial promotion not to be clear, fair and not misleading; and

   9. (i)

      the accuracy of all material statements of fact in it can be substantiated.

2. (2)
   1. (a)

      Compliance with COB 3.8.5 E(1) may be relied on as tending to show compliance with COB 3.8.4 R(1).

   2. (b)

      Contravention of COB 3.8.5 E(1) may be relied on as tending to show contravention of COB 3.8.4 R(1).