Financial firms will no longer be allowed to use “cherry picked” data about historic fund performance in their advertisements under new rules, introduced by the U.K.’s Financial Services Authority (FSA), that come into force June 1.

To prevent firms selectively using data to present their past performance in a flattering light, standardized data must now be included in advertisements referring to past performance.

Under the new rules:

    past performance information used in advertisements must be accompanied by standardized data showing discrete annual returns for the previous five years;

  • where less than five years data is available, firms must give information for as many 12-month periods as possible; and
  • past performance information may not be included for funds with less than 12 months of data.

The rules also aim to improve the balance in advertisements by reducing the emphasis on past performance, strengthen the warning so that it appears in the main body of the advertisement, not buried in the small print, and prevent firms from making a link between past performance and the future.