The FCA has publicly censured Equity for Growth (Securities) Limited (EFG) for approving financial promotions that failed to disclose high commission fees. The case offers a stark reminder for every IFA about what 'fair, clear and not misleading' actually means in practice.
What Happened
EFG operated as a gateway firm, approving financial promotions for its appointed representatives (ARs) who were marketing mini-bonds to retail investors. The problem? Those promotions didn't tell investors about the substantial commission fees the ARs were charging.
We're not talking about minor omissions here. The commission fees were significant enough that the FCA determined their absence made the promotions misleading. Investors couldn't make informed decisions because they didn't know how much of their money was going to the people selling them the product rather than into the investment itself.
EFG has since gone into administration, but the FCA proceeded with the public censure anyway. That's a deliberate signal: even if your firm fails, the regulator will still pursue enforcement action to make an example of poor conduct.
Why Fee Disclosure Matters More Than You Think
The FCA's rules on financial promotions under COBS 4 are clear: promotions must be fair, clear and not misleading. But what does that mean for fee disclosure specifically?
It means you can't bury fees in the small print while leading with attractive headline figures. It means you can't omit fees that would materially affect an investor's decision. And it means that if you're approving promotions for others—as a principal firm does for its ARs—you're on the hook for getting this right.
Consider the investor's perspective. If you're looking at a mini-bond offering 8% returns, your calculation changes significantly if 3% of your investment is immediately paid out as commission. That's not a minor detail. That's the difference between a reasonable investment and a questionable one.
The AR Liability Problem
This case highlights a specific risk that many IFAs don't fully appreciate: if you operate as a principal firm with appointed representatives, you're responsible for their promotions.
EFG wasn't creating these misleading promotions directly. Its ARs were. But as the firm that approved those promotions for communication to the public, EFG carried the regulatory responsibility. When those promotions turned out to be misleading, it was EFG that faced the censure.
For IFAs who work with ARs or are considering becoming a principal firm, this is worth serious thought. Your compliance framework needs to catch exactly this kind of problem before promotions go out, not after the FCA comes knocking.
Practical Steps for Your Own Promotions
Whether you're a sole practitioner or running a larger firm, here's what this case tells us about getting fee disclosure right:
Be explicit about all costs. Don't assume investors will work out the full cost structure from scattered references. State clearly: "You will pay X% as our advice fee, plus Y% as platform charges, plus Z% as fund management fees." Total it up for them.
Test your promotions on someone unfamiliar with them. If a reasonably intelligent person who hasn't seen the promotion before can't quickly understand what they'll pay, your disclosure isn't clear enough.
Check the prominence. Fees disclosed in size 8 font at the bottom of page 4 aren't really disclosed at all. The FCA expects costs to be given appropriate prominence—not necessarily equal billing with benefits, but not hidden either.
Document your approval process. If you approve promotions for ARs, keep records showing what you checked and why you concluded the promotion was compliant. "I looked at it and it seemed fine" won't protect you.
Review existing materials. When did you last audit your website, your client-facing documents, your social media posts? Promotions that were compliant two years ago might not meet current expectations, particularly around Consumer Duty requirements for clear fee information.
The Wider Context
This censure comes at a time when the FCA is clearly focusing on financial promotions as an enforcement priority. The mini-bond scandal, the crypto promotion rules, the ongoing social media crackdowns—there's a pattern here.
The regulator has limited resources and has to choose where to focus. Right now, it's choosing promotions. That means the risk of enforcement action for promotional failures is higher than it's been for years.
For IFAs, this isn't cause for panic, but it is cause for a proper review of how you communicate with clients and prospects. Are your promotions genuinely fair, clear and not misleading? Would they survive FCA scrutiny?
If you're not certain, now is the time to find out—before the regulator does it for you.
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