The Financial Conduct Authority’s chief executive officer has pressed the government to amend its planned online harms rules to include advertisements as a way of tackling scams.
In a podcast today (August 4), Nikhil Rathi reiterated the regulator was keen for ads to be included in the Online Safety bill, which is currently going through parliament, in line with calls from the industry.
Rathi said; “We’re very keen for investment fraud, economic harm, to be included in that bill, in particular as it relates to online advertising and we’ve been very clear publicly about that, so that as parliament considers this legislation they can consider whether they wish to amend this.
“And in that regard, both the Treasury Select Committee, and The Work and Pensions Select Committee have supported this proposal. It will now be a matter for parliament and government to decide whether to pass the amendment that would enable this to happen.
“We think it would play a decisive role in helping us to protect consumers from online harm, and particularly those scams that target vulnerable consumers and cause them to lose significant parts of their life savings.”
Since then industry members and MPs have hit back urging the government to include these amendments in the bill.
In particular, they want the government to force internet giants to stop investment fraud facilitated through online advertisements as part of the bill.
But so far the government has rejected these calls. Instead, it said there would be a consultation on online advertising regulation later in the year.
However, the industry has not given up as towards the end of last month, a coalition of consumer groups, charities and financial services industry bodies came together to increase pressure on the legislators.
The Personal Investment Management and Financial Advice Association, the Investment Association, Which?, UK Finance, Martin Lewis and MoneySavingExpert, among others, warned the government that its approach to tackling online fraud was “flawed” and would lead to "complex and muddled regulations, and far worse consumer outcomes than an Online Safety bill with a comprehensive approach to online fraud".
The group said this view was backed by the Financial Conduct Authority, Bank of England, City of London Police and Work and Pensions committee and Treasury committee.
Around the same time, the Treasury and Work and Pensions committees also wrote to the prime minister urging him to reconsider the government's position.
In the letter, they argued legislating against fraud committed through paid-for advertisement had "strong cross party support” and that not doing so would result in "potentially large financial losses to the public”.
FCA’s ambitious roadmap
Meanwhile last month, the FCA announced its policy goals in its business plan for the coming year, most notably a pending review of the Financial Services Compensation Scheme.
The 48-page document was the first business plan under Nikhil Rathi, who joined in October and pledged the FCA to become a forward-looking, proactive regulator and that it would make three distinct changes: being more innovative, testing the limits of its own powers and better engaging with partners, and being more adaptive.
In the podcast today, Rathi was also asked about the FCA’s “ambitious roadmap” and why it has chosen now to make these changes.
Rathi said: “We’re currently in a world which is changing incredibly fast – technology is moving rapidly, and we’ve seen that during the pandemic. The growth of online consumer activity has increased very dramatically.
“We have major external trends too; the transition to a net zero economy, and in the case of the UK we are also changing our regulatory framework or in effect re-writing our regulatory framework after the UK has left the European Union.
“These are all really big changes that require us to adjust as a regulator and transform the way we operate, using data and technology very differently to the way we have done in the past, to be able to deal with these modern challenges.”
The FCA boss said it came in light of reviews that have been done about the way the FCA has operated in the past, from which there have been “a number of lessons” that the regulator wants to learn from and respond to.
Rathi explained that with markets moving fast, and the speed at which fraud can be perpetrated and consumers can lose money, it was important for the FCA to be able to act in a quick and agile manner, and therefore he wants to ensure it uses its intervention powers in an effective way to protect consumers and ensure market integrity.
“So, what does mean in practice?,” he said. “That will mean you will see us stepping in earlier and taking action earlier where we believe firms are not cooperating as effectively as we want would want them to in tackling the harm we are seeing.
“And we think that the majority of firms will support this because it’s in the interest of the whole industry and in the markets that bad actors are dealt with as decisively as possible.”
sonia.rach@ft.com
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