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FSA fines friendly society

The Financial Services Authority has fined The Ancient Order of Foresters Friendly Society 55,000 for financial promotions failings, including substandard television advertisements and direct offer packs which targeted elderly consumers.

This is the first time the FSA has fined a friendly society for financial promotions failings.

The FSA imposed the fine because Foresters failed to promote financial products to consumers in a way that was clear, fair and not misleading.

Foresters neglected to ensure that promotion of two of its products, ‘Autumn Gold’ and the ‘TeddyTrust’ child trust fund, contained a fair and adequate description of the risks and drawbacks of the product.

In addition, the FSA was concerned that Foresters had described its ‘Autumn Gold’ whole of life insurance policy as a funeral plan in one of its promotions, when it was not a funeral plan.

The seriousness of Foresters’ failings was made worse because its target market was elderly consumers whom it did not make aware should seek advice if in doubt about the suitability of the Autumn Gold policy.

The failings, which occurred between January 1 2004 to June 2005, were discovered as a result of an FSA investigation rather than through Foresters’ internal systems or procedures.

Margaret Cole, director of enforcement at the FSA, says: “It is important that firms are aware of the significant influence financial promotions have on consumers’ financial decisions.

It is therefore important that financial promotions clearly explain the benefits and risks of a product in a balanced way to ensure consumers are not misled.

Foresters put consumers at risk despite warnings to firms from the FSA on specific areas of financial promotions that needed improvement.

Ensuring that financial promotions are clear, fair and not misleading is a responsibility firms should not take lightly and other firms should take heed.”

The promotions included television commercials featuring actress Stephanie Cole and television personality Tommy Walsh, which were aired at various times between January 2004 and March 2005.

There were also advertisements in magazines and newspapers as well as online promotional material.

In imposing the fine, the FSA recognises the steps being taken by Foresters to ensure its compliance with its rules, its cooperation with the FSA during the investigation, and the remedial action Foresters has taken in relation to Autumn Gold policyholders and will be taking in respect of customers who bought a TeddyTrust product.

Were it not for these factors, the penalty imposed would have been higher.

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