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UK's Financial Services Authority Chase De Vere Fined £165,000 Over Misleading Promotion

Date 19/12/2003

The Financial Services Authority has fined Chase de Vere £165,000 for approving and issuing a misleading direct offer promotion which included high income and precipice bonds. The promotion was circulated with more than 2 million copies of national newspapers and was directly mailed to 236,000 prospective customers.

Entitled, "Your Guide to Investment Recovery" it promoted four separate products: a UK Growth Cocktail Fund, a Corporate Bond Cocktail Fund, an Enhanced Income Plan and an Enhanced Growth Plan. These products were not capital guaranteed. Two of the four were complicated stock market linked investments that involved detailed formulae to determine investment return and exposed investors to significant losses of capital in certain circumstances. These two products would have been unfamiliar to the ordinary investors at whom they were targeted. Taken as a whole, the promotion was not "clear, fair and not misleading" as significant risk factors were not given due prominence.

The promotion's defects were identified by the FSA's Financial Promotion Monitoring Team. It contained defects that had previously been identified and criticised by the team when examining earlier promotions. Even though the firm had disputed whether some of the criticisms were justified, it had agreed that it would take all of them into account in its future promotions. Chase de Vere's existing compliance systems were not, however, put into practice properly so as to prevent the repetition.

Since then, Chase de Vere has contacted the 259 customers who responded to the promotion, notified them of the failings, clarified the misleading impressions given and offered redress. Customers have been given the opportunity to cancel their investment without loss. To date, 14 have accepted this offer. The firm has also arranged for the vetting and approval of financial promotions to be dealt with by its parent company's in-house compliance department.

FSA Director of Enforcement, Andrew Procter, said:

"The FSA has made it clear time and time again that financial promotions must not mislead and that significant risk factors should be given due prominence. Chase de Vere failed to heed the warnings."

Chase de Vere has been open and co-operative with the FSA during the investigation. Were it not for the co-operation shown and the remedial action taken, the financial penalty would have been much higher.