The UK Financial Services Authority (FSA) issued new guidance on investment advertisements on the Internet last week.
It was trying to clarify the issues for overseas companies, particularly US corporations, that fear their more liberal advertising practices might fall foul of UK law. The London based FSA said in a letter: "It would be unlikely to take enforcement action against mutual funds provided their Web sites include certain safeguards."
The Authority wants Web sites to carry disclaimers and warnings on the home page and application form pages, stating that the services are either not available in the UK, or are available only in named jurisdictions.
"It should be clear where the firm is not authorised or permitted by local law to promote or sell the product," said the FSA, emphasising that these guidelines also apply to hypertext links.
An EC Directive comes into force in 2000 to try to harmonise national advertising practices. Until then, member countries are self regulating, and any company looking at advertising in the EC must account for local legislation, regardless of the advertising medium. The UK is more liberal than most EC countries. It allows comparative advertising, for example, which is virtually impossible in France and Italy, and illegal in Germany.
When an advertisement is brought up on a screen by a UK computer user, it could be argued to have originated in the UK and subject to provisions laid out in Section 57 of the Financial Services Act. There are genuine difficulties where accessible material is not intended for UK investors.
The Authority will look at whether sites are notified as UK sites to search engines or listings, and whether email, newsgroup, bulletin board or chat rooms are promoting investments in the UK.
One problem with the FSA's guidance is that interpretation of the Financial Services Act is ultimately a matter for the courts, and the guidelines can only indicate how the FSA interprets provisions in the Act.
It will act on case-by-case basis, it said, looking at "whether the site poses risks to investors in the UK; if the site is located on a server outside the UK; and if there are other potential infringements of the Financial Services Act, such as misleading statements."
It will also examine "whether UK investors can access the investments advertised on the Internet, directly and through other media; [the efficacy of] a firm's system for ensuring that only persons who may lawfully receive investment services do so; and the extent to which any advertisement is directed at persons in the UK."
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