The chief executive of the Financial Conduct Authority has expressed concerns that some regulated companies are still falling "well short" of the standards he expects on financial promotions of retail investments.
Andrew Bailey has written to all companies engaged in approving these promotions to warn them that the FCA treats this matter seriously but that due diligence is still not up to scratch.
This is despite the fact that the FCA wrote to all regulated companies in January to remind them of their responsibilities relating to the use of financial promotions.
But he has now said the FCA has identified a number of companies which appear to still be failing to meet the regulator's standards.
Mr Bailey said: "Retail investment products can expose consumers to a range of differing risks and returns and, particularly where those risks are not adequately explained, this can cause significant harm to investors and undermine the effective functioning of the sector as a whole.
"Accordingly, it is important the financial promotions of these products reflect an appropriate level of due diligence into the risks they bear."
He said that even when investment products are not regulated, or are issued by companies which are no FCA-authorised, should a company provide a s21 approval of their promotion, the regulator will still expect that company to demonstrate that it carried out due diligence to ensure the promotion was fair, clear and not misleading.
Mr Bailey added: "Given that a number of retail investments promise high returns and/or feature complex terms and structures, they present an inherent challenge to being promoted in a manner that is fair, clear and not misleading.
"Where we observe non-compliance with our requirements by firms which approved promotions we will take action."
Mr Bailey's warning came after the collapse of London Capital & Finance, a mini-bond provider which went into administration at the end of January, putting the funds of more than 14,000 bondholders at risk.
Shortly before its collapse the FCA ordered London Capital & Finance to stop marketing its fixed-rate investment bonds and Isa products and the provider had its assets frozen by the regulator.
The FCA alleged the Tunbridge Wells-based firm had signed clients up to fixed-rate Isas promising 8 per cent interest, with investors' capital then invested into mini-bonds used to issue loans to small businesses.
There were concerns the 14,000 clients of the firm may not have fully understood the nature of the investment they were making due to unclear marketing material.
As unregulated investments, London Capital & Finance did not need to be authorised by the FCA to issue the mini-bonds but it did need to be authorised to issue the promotion of the mini-bonds.
In his letter Mr Bailey said direct offer financial promotion of mini-bonds and other unlisted securities to retail clients was generally restricted to high net worth investors, sophisticated investors or "restricted investors" who have certified that they are not investing more than 10 per cent of their net assets in non-readily realisable securities.