Strengthening Financial Promotions Rules

The riveting read that is the FCA’s 2021/22 Business Plan sets out their consumer priorities for the year ahead. One of these priorities is to enable consumers to make effective investment decisions as documented in the recently published Consumer Investment Strategy here . To those of us longer in the tooth, much of this has been seen and read before in various guises, although in fairness, it does merit more than a cursory glance, particularly given the considerable effort needed to produce the array of pretty graphs and diagrams.

Scepticism aside, one of the concerns covered in the strategy is Higher Risk Investments; addressing the harm from consumers investing in high-risk investments that do not match their risk tolerance, is a central element.

The FCA is proposing stronger rules, as detailed in this consultation paper, to ensure that firms have relevant expertise and understanding in order to promote such investments, improved risk warnings and the banning of incentives to invest e.g. refer-a-friend. Those looking to make certain high-risk investments would also be asked more robust questions about their knowledge and investment experience.

The FCA’s draft rules include proposed restrictions on the marketing of cryptoassets, in preparation for the Government bringing the promotion of these high-risk investments under the FCA’s remit. The FCA is clearly concerned that it is all too easy for retail clients to cryto-invest. The plan is to categorise qualifying cryptoassets as ‘Restricted Mass Market Investments’, meaning consumers would only be able to respond to cryptoasset financial promotions if they are classed as restricted, high net worth or sophisticated investors.

The rules mean the promotion of qualifying unregulated cryptoassets, such as bitcoin, must adhere to the same standards that financial promotions, such as stocks, shares and insurance products, are held to.

The FCA is inviting feedback on its proposals by 23 March 2022, with confirmation of final rules due in Summer 2022.

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

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Our View

This is a sensible and, for once, proactive move by the FCA. There is a history of unregulated, high risk investments causing consumer harm, so moving now to regulate the promotion of what will inevitably become more mainstream in the years ahead, makes good sense.

Action Required By You

Respond to the consultation if wished. Otherwise, for information only.
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About the Author

Lisa has a wide range of skills and knowledge, and a track record of implementing compliance and T&C systems and processes of the highest calibre, covering all aspects of financial services.

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