FCA Strengthening of Financial Promotion Rules for High-Risk Investments

Background

The Financial Conduct Authority (FCA) is looking to protect consumers from harm when investing in high-risk investments. This is a key strand of the FCA’s Consumer Investments Strategy which has the overall aim of helping the consumers invest with confidence and enabling them to understand the risk they are taking and the associated regulatory protections afforded.

What are the High Risk Investments that the FCA are concerned about?

The following is a brief list of the types of High-Risk Investment covered:

  • investment based crowdfunding
  • peer-to-peer agreements
  • non-readily realisable securities
  • non-mainstream pooled investments and speculative illiquid securities.

A key point for firms is that the crypto assets will also be included when they are eventually brought within the financial promotion regime.

Further Considerations

  • Financial Promotions (and their issuers) should be cognisant of the fact that in the ever changing landscape, investors are being ever further driven by social and emotional factors.
  • Financial Promotions (and their issuers) should be cognisant of the fact that in the ever changing landscape, investors are being ever further driven by social and emotional factors.

For the complete guidance, the relevant FCA link to the consultation can be found at the bottom of this page. Further context for consideration is provided by the FCA’s interventions in this space, for example, its banning of mass-marketing of speculative illiquid securities. Firms should be aware that HMT are expected to confirm that promotions for crypto assets will be brought within the financial promotions regime.

It is currently anticipated that the Policy Statement and Handbook Rules will be published during Summer 2022.

Anticipated action for firms upon the publication of the policy

  • Firms will have 3 months from the publication of the final rules to comply with the new requirements.
  • This will include Section 21 approvers (i.e., authorised firms who approve financial promotions for unauthorised firms) with the exception where changes relate to crypto asset promotions, in which case the rules will apply from the date qualifying crypto assets are brought within the financial promotion regime.

Read our other latest items from the Regulatory Calendar at:

FCA Business Plan 2022/23 >>

FCA Market Study on how competition is working between Benchmarks >>

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The full feedback statement can be found on the FCA website here.

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