FSA slaps £500,000 fine on AXA

INSURANCE giant AXA Sun Life was today fined £500,000 for producing misleading advertisements over a two-year period promoting the sale of two financial products. One of the investments was was strongly criticised by This is Money and our sister newspapers Financial Mail and Money Mail.

The Financial Services Authority said AXA Sun Life's ads for the Bonus Cash Builder Plus Plan (BCP) and the Guaranteed Over 50 Plan (GO50) did not provide customers with sufficient information about how the product worked or the risks involved. The promotions focused on the benefits of the products, including the offer of free gifts, but gave less prominence to key information about the risks.

Also, advertisements for the BCP between January 2002 and April 2003 included comparative data that was itself inaccurate. The FSA said: 'The serious nature of AXA Sun Life's breaches was compounded by the firm's failure to promptly inform the FSA of the data error. The firm discovered the error in April 2003. Although the error was remedied immediately, the FSA was not informed of the error until the firm wrote to the FSA on 19 November 2003.'

The FSA added: 'The advertisements were part of a far-reaching media campaign which included direct-offer promotions, advertising in a variety of national magazines and newspapers and television advertisements. They were distributed over a considerable period of time, February 2002 to January 2004, thereby putting a significant number of consumers at risk of being misled. '

The Bonus Cash Builder was rubbished by This is Money and other financial commentators because it is an endowment policy and its performance is based on the stock market which was falling heavily at the time. As early as 2001, Financial Mail and Money Mail warned about the plan's high charges.

The advertising campaign, which was fronted by Changing Rooms presenter Carol Smillie, was targeted at customers who were less likely to be aware of the risks.

After the FSA's intervention in January 2004, AXA Sun Life withdrew the whole promotional campaign for both products. The firm has since written to customers and appointed an independent third party to report on its systems and controls relating to financial promotions. However, the BCP is back on sale and Carol Smillie is still promoting it.

The FSA ruling pointed out that the fine would have been higher had it not been for AXA's co-operation.

Andrew Procter, Director of Enforcement at the FSA, said: 'The FSA takes the issue of misleading financial promotions very seriously. We expect firms to comply with the spirit, not just the letter, of the rules, so that consumers gain a clear and fair understanding through the promotion.

'If a firm's financial promotions fail to meet our requirement to be fair, clear and not misleading, and the firm fails to treat its customers fairly, we will not hesitate to act.'

This afternoon AXA said it regretted 'the shortcomings in certain advertisements' and the use of incorrect building society data in a chart showing a performance comparison of BCB with a building society account. Paul Evans, chief executive of AXA Sun Life, said: 'We take our commitments to our customers extremely seriously and work hard to ensure that our advertising is as clear as possible.'