The Financial Conduct Authority (FCA) has proposed measures to clamp down on misleading financial marketing in the UK.
The city authority wants to put new screening checks in place to ensure companies can provide evidence that they have the correct level of expertise before approving financial promotions.
At the moment, any FCA authorised company can approve financial promotions on behalf of other firms that are not authorised by the regulator. However, changes that will be implemented by parliament will mean authorised firms will have to undergo new screening checks before they are allowed to approve financial promotions, meaning the FCA will have a better chance at stopping harm.
The reforms will allow the authority to challenge and prohibit harmful financial promotions sent out by unauthorised firms, including in areas such as buy now pay later and high-risk investments.
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“We’ve seen evidence of consumers investing in high-risk products that are not aligned with their risk tolerance, due to poor-quality approved financial promotions,” the FCA consultation document said.
“In the worst cases, the performance of investments was markedly different from the claims made in promotions or the product failed, in each case leading to significant and unexpected losses for retail investors.”
The consultation is open until 7 February 2023.
FCA executive director of markets, Sarah Pritchard, added: “Social media and online advertising means that consumers are taking less time between seeing a promotion and making a financial decision.
“It is, therefore, essential that they are equipped with the right information at the right time so that they can make good financial decisions. This is especially important as we face the rising cost-of-living.
“These proposals will ensure those approving ads have the appropriate expertise and are held accountable for the promotions they sign off.”
