UK regulator to crack down on adverts in high-risk investments

The Financial Conduct Authority (FCA), UK’s financial regulator, has announced a clampdown on the marketing of high-risk investments amid the need to make sure investors are not hoodwinked into high risk products.

The FCA’s tough stance was highlighted in a press release on Monday, in which the regulator said it had finalised its work on stronger rules on marketing and promotions in high-risk investments.

New rules don’t apply to crypto – yet

While FCA’s new regulatory guidelines provide an intervention against misleading financial promotions around high-risk investments, they do not apply to crypto.

That’s what the agency said in its release, explaining that applying these rules across cryptoasset promotions will only be considered “once the Government and Parliament confirms in legislation how crypto marketing will be brought into the FCA’s remit.”

When this happens, the regulator will announce qualifying rules on cryptoasset ads respective of the given type of asset. Generally, however, it is expected the crypto-related rules will not differ markedly from those being introduced for high-risk investments. 

FCA’s fight against misleading adverts

Under its new rules, the FCA wants all companies involved in the approval and issuance of marketing materials to have the appropriate expertise. As well, any firm engaged in the marketing of high-risk investments is obligated to conduct better checks, ensuring that targeted consumers match the intended investments.

The new rules also align with the Consumer Investments Strategy, which is intended to limit potential exposure to high-risk offerings that don’t reflect a consumer’s risk appetite. It’s an objective the regulator wants to achieve and demands that marketers provide clearer risk warnings, and which must be prominent within advert.

Notably, the use of incentives such as ‘refer a friend bonuses’, targeting investors’ connections have been banned. 

‘We want people to be able to invest with confidence, understand the risks involved, and get the investments that are right for them which reflect their appetite for risk,” said Sarah Pritchard, FCA’s Executive Director, Markets. 

According to the FCA, the tough rules intend to tackle “poor financial promotions” that are likely to see investors fail to appreciate the risks of investing and losses that may come with certain investment products.