FCA clamps down on high-risk investment advertisements

Stronger rules to help tackle misleading adverts that encourage investment in high-risk products have been finalised by the FCA.

Under the new rules, firms approving and issuing marketing must have “appropriate expertise”, the regulator stated, while firms marketing some types of high-risk investments will need to conduct better checks to ensure consumers and their investments are well matched.

Firms also need to use clearer risk warnings while incentives to invest, such as “refer a friend bonuses”, are now banned.

As part of its Consumer Investments Strategy, the FCA stated its intention to reduce the number of people who are investing in high-risk products that do not reflect their risk appetite. This follows concerns that a significant number of people who invest in high-risk products do not view losing money as a risk of investing, and invest without understanding the risks involved.

In the last year, the FCA has intervened in significantly more financial promotions to prevent harm. In the year to the end of July 2022, 4,226 adverts were amended or withdrawn after intervention from the FCA.

“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,” commented FCA executive director, markets, Sarah Pritchard.

“Our new simplified risk warnings are designed to help consumers better understand the risks, albeit firms have a significant role to play too. Where we see products being marketed that don’t contain the right risk warnings or are unclear, unfair or misleading, we will act.

“This is even more important now because increases in the cost of living could prompt people to chase higher investment returns which may prove risky.”

However, the FCA confirmed that the new rules will not apply to cryptoasset promotions. Once the government confirms in legislation how crypto marketing will be brought into the FCA’s remit, the regulator will publish final rules on the promotion of qualifying cryptoassets.

The FCA did indicated that these rules are likely to follow the same approach as those for other high-risk investments.

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