Following feedback to its Call for Input on Consumer Investments, FCA has published a discussion paper on proposals to strengthen its financial promotion rules for high-risk investments.
The paper focuses on three main areas where FCA plans to strengthen its financial promotion rules to help investors make more effective decisions that meet their savings and investment needs:
- The classification of high-risk investments: FCA’s classification of investments determines the level of marketing restrictions that applies to that investment. FCA is seeking views on whether more types of investments should be subject to marketing restrictions and what marketing restrictions should apply, for example for equity shares and Peer-to-Peer agreements.
- Further segmenting the high-risk investments market: FCA is concerned that despite its existing marketing restrictions, too many consumers are still investing in inappropriate high-risk investments which do not meet their needs. Therefore, FCA plans to strengthen its rules to further segment high-risk investments from other investments. In particular, FCA is considering what improvements could be made to risk warnings. Other suggestions in the paper include requiring consumers to watch educational videos or to pass an online test to demonstrate sufficient knowledge about financial products. This could help prevent consumers from simply clicking through and accessing high-risk investments that they do not understand.
- The approval of financial promotions: Firms which approve financial promotions for unauthorised persons play a key role in ensuring those promotions meet the standards we expect. FCA is seeking views on whether there should be more requirements for these firms to monitor a financial promotion on an ongoing basis, after approval, to ensure it remains clear, fair and not misleading.
FCA is inviting feedback until 1 July 2021. It then intends to consult on rule changes later this year.
FCA will also publish a full response to its CFI on consumer investments, alongside the next steps on its wider consumer investments strategy, later in the year.