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The Analysis News & Opinions


Productivity slumps as uncertainty pulls on SMEs

FCA sets record straight on adverts

The financial regulator has written to the chief executives of regulated firms to remind them of their responsibilities relating to the use of financial promotions. Andrew Bailey, chief executive of the

Last month’s productivity data demonstrate exactly what a prolonged period of uncertainty does to an economy. Small-business confidence has dropped to

its lowest point since the financial crash, with four in 10 firms expecting their performance to worsen in the months ahead. More than two-thirds are not planning to

increase capital investment next quarter. Without investment in productivity-enhancing technology, machinery, and skills, we are unlikely to see figures improve any time soon. But naturally small-business owners are

holding fire on investing for the future because – less than 80 days from Brexit, at the time of writing – they simply do not know what the future holds. Equally, with net migration from the

European Union plummeting over the past couple of years, and employment levels at record highs, it is proving harder and harder to bring in the right employees with the skills and drive to boost output per hour. Labour costs are soaring, and will rise

again in April when minimum wage rates and employer auto-enrolment contributions increase again. In this context we need to see the government re-visit initiatives to support the smallest employers, starting with an increase in the now effectively-targeted Employment Allowance.

Mike Cherry National chairman, Federation of Small Businesses

Financial Conduct Authority (FCA), said that they had recently become aware of firms issuing financial promotions which suggested or implied that all of the activities which they undertook were regulated by the FCA or the Prudential Regulatory Authority when they are not. The letter reminds firms’ senior managers

and boards of what constitutes fair, clear and unambiguous financial promotions. The letter read: “The FCA regulates the

communication and approval of financial promotions (that is, an invitation or inducement to engage in investment activity). Any form of communication (including through websites and social media) is capable of being a financial promotion. “It is unlawful for a person in the course

of business to communicate a financial promotion unless (i) that person is an authorised person, (ii) the content of the communication is approved by an authorised person, or (iii) a relevant exemption applies (section 21 of the Financial Services and Markets Act 2000). “All financial promotions must be fair,

clear and not misleading. Part of meeting this standard includes ensuring that (where relevant)

those to whom a financial

promotion is addressed, or at whom it is directed, understand the extent of the relevant firm’s business that is regulated. Some of the firms that we regulate undertake both regulated and unregulated business.” The letter insisted that the FCA had made

clear in its Handbook that if a firm named the FCA or the PRA as its regulator in a

financial promotion that refers to aspects of its business, such as products or services, which are not regulated by them, then the promotion should make clear those aspects which are not regulated. It reminded firms: l Of the rule in GEN 4.5.4R which states that “a firm must not indicate or imply that it is regulated or otherwise supervised by the FCA in respect of business for which it is not regulated by the FCA”. l That before they approve a financial promotion for communication by an unauthorised person, they must confirm that the promotion complies with the FCA’s rules on financial promotions. This includes ensuring the financial promotions which they approve are fair, clear and not misleading. It warned that, while the FCA does

not approve advertising and it is up to firms to ensure that financial promotions are compliant with its rules, it does monitor adverts across different media in the UK. Firms are also reminded that the FCA does have the power under section 137S of FSMA to direct a firm to withdraw an advert (or its approval of an advert), or to prevent it from being used in the first place. Meanwhile, Jonathan Davidson, executive

director of supervision – retail and authorisations at the FCA, added: “It is completely unacceptable for firms, which are regulated for some of their business, to market unregulated investments by implying to customers that all their business is regulated.”


February 2019

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