FCA tightens financial promotion rules over risky investment fears
The City watchdog revealed it is tightening its financial promotion rules today amid fears that firms are peddling products to consumers without proper oversight.
The Financial Conduct Authority said today that firms would now need to regularly report back to the watchdog to approve financial promotions and demonstrate they have the “right expertise for the promotions they wish to approve”.
The new guidelines come amid a wider push from the regulator to tighten the screws on consumer facing firms and ensure customers are not exposed to potentially damaging products, as finances are squeezed by a cost of living crunch.
Morning Wire revealed last month that the watchdog had already written to buy-now pay-later firms, which currently sit outside its jurisdiction, warning they would be rebuked if they did not hire regulator-approved personnel to approve their promotions.
The FCA said the latest changes would allow it to clampdown on “rogue adverts” and put a stop to harmful promotions by unauthorised firms.
“Social media and online advertising means that consumers are taking less time between seeing a promotion and making a financial decision,” said Sarah Pritchard, executive direct of markets at the FCA.
“It is, therefore, essential that they are equipped with the right information at the right time so that they can make good financial decisions. This is especially important as we face the rising cost of living.”
The watchdog is ramping up scrutiny on investment information as part of its Consumer Investment Strategy, which it said aims to reduce the number of people investing in high-risk products that are not “aligned to their needs”.
Analysts said today the move would squeeze crypto and BNPL firms as they look to spread awareness.
“The FCA has been slow to move on tackling the huge number of social media posts luring people into investing in high-risk schemes or crypto trading without stating the real risks involved,” said Laura Suter, head of personal finance at AJ Bell.
“Alongside this the regulator wants to squeeze the Buy Now Pay Later market and ensure that people fully understand the risks of using the products.”