Responding to a consultation by HM Treasury, the Personal Investment Management & Financial Advice association today (October 26) urged for the approval of unauthorised financial promotions to become a regulated activity.
The trade body said the call was of particular importance in the current environment of "ultra-low" interest rates and financial anxiety, when consumers may be drawn towards investments promising unrealistically high returns.
Pimfa warned these types of investments were often marketed to those "on lower incomes or inexperienced savers".
Simon Harrington, senior policy adviser at Pimfa, said: "Making the approval of financial promotions a regulated activity would mean the FCA could take enforcement action against those firms that approve unsuitable investments without having the necessary expertise to do so."
The Financial Conduct Authority does not approve advertising, and last year warned firms against falsely advertising unregulated products as being regulated by the city watchdog.
In two consultations launched in July the Treasury warned the current safeguards in place to protect retail investors from misleading adverts and certain types of cryptoassets fell below par.
Under existing rules, if an unauthorised firm wants to market a particular financial product they are first required to get the promotion approved by an authorised firm.
But the Treasury warned the "variety and vast quantity" of products being offered on the market meant the requirement to secure approval from an authorised firm "no longer provided a strong enough safeguard".
As part of its package of proposals the government therefore wants authorised firms to obtain specific FCA consent before approving the financial promotions of unauthorised firms.
Mr Harrington said the calls came in light of the potential threat to consumers and the knock on costs to the industry via the Financial Services Compensation Scheme, a topic which the trade body has put its weight behind in recent months.
He added: "This will improve the market; reduce consumer harm and ultimately reduce calls on the compensation scheme where rising levies over the last five years have become unsustainable for Pimfa members.
"This is an easy win for all parties involved and we are urging them to grasp this opportunity."
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