No longer a Potemkin village*

Timon Molloy, Editor. For details of City and Financial events please visit www.cityandfinancial.co.uk

Interpretation and application of the FSA financial promotion regime agitates lawyers a lot,Tamasin Little, partner at SJ Berwin, remarked in opening City and Financial’s conference in early June. It provides much of the “bread and butter” for both law firms and for the compliance departments of their clients. Business that are already FSA-regulated would not look automatically to the Authorisation manual for guidance, she noted, but it was very useful in the case of financial promotions: “The FSA guidance in Appendix 1 attempts to provide a workable version of the regime.” It says, for example, that some element of persuasion or inducement is required, which does not arise merely from asking someone if they want to participate in an investment. Nor would it, said Ms Little, if a “bone-headed investor” chose to base his decision on some entirely irrelevant factor, such as “the star sign of the chief executive”, an example of ‘misbuying’ rather than mis-selling.The FSA will look at causation but in a non-legalistic way. Is the material part of a chain that led to investment activity? Does it incite or seek to persuade someone to attend a meeting or request, for example, an ISA pack, which would not per se be a promotion:“The difference between factual information and financial promotion is hard to tell sometimes,” she noted, just as the distinction between incitement and advice could be fine.