FCA Publishes Discussion Paper on Strengthening Financial Promotion Rules for High-Risk Investments and Firms Approving Financial Promotions
On April 29, the Financial Conduct Authority (FCA) published a discussion paper (DP21/1) on strengthening its financial promotion rules for high-risk investments and firms approving financial promotions.
The FCA requested views on three areas where change could better protect consumers from harm:
Classification of high-risk investments: The FCA’s classification of investments determines the level of marketing restrictions applicable to an investment. It is asking whether additional types of investments should be subject to marketing restrictions and what marketing restrictions should apply;
Segmentation of high-risk investment market: Despite the FCA’s existing marketing restrictions, it is concerned that too many consumers continue to invest in inappropriate high-risk investments. It plans to strengthen its rules to further segment high-risk investments from the mainstream market and is seeking views on certain aspects of this; and
Responsibilities of firms approving financial promotions: The FCA is considering whether there should be more requirements for firms approving financial promotion, under section 21 of the Financial Services and Markets Act 2000, to monitor such a promotion on an ongoing basis to ensure that it remains compliant.
The FCA will also be testing ideas informed by behavioral research to obtain a better insight on their effectiveness and this, along with feedback to DP21/1, will shape the changes the FCA intends to consult on later this year.
DP21/1 follows feedback to the FCA’s call for input (CFI) on consumer investments. The FCA will publish a full response to the CFI later in 2021, alongside its next steps on its wider consumer investments strategy and the summary of work completed to tackle harm in the consumer investment market in the financial year 2020/21.
Comments on DP21/1 are open until July 1.