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.