The Financial Conduct Authority is probing whether internet tech giants are complying with its financial promotion restrictions.
In the regulator’s annual perimeter report published today (October 21), the FCA said since the end of the Brexit implementation period earlier this year, an exemption to the financial promotion restriction which could be used by online platforms has fallen away.
The regulator has, as a result, been looking at the operations of the major online platforms to determine whether they are now subject to the restriction and, if so, whether they are compliant.
“Where they are not, we will take action to ensure consumers are protected,” it said.
Meanwhile the FCA has asked the government to come up with new laws for internet giants to protect consumers.
The FCA again told the government that duties on internet companies in the Online Safety Bill should extend to paid-for advertising, as well as user-generated content.
The City watchdog said the bill should designate content relating to fraud offences as ‘priority’ illegal content and require monitoring and preventative action by internet platforms such as Google.
The FCA said: "We continue to believe the protection of consumers from illegal online scams would be strengthened through clear legal obligations on platform operators within the Government’s Online Safety Bill (OSB) and that the duties in the OSB should extend to paid-for advertising, as well as user-generated content."
This comes as earlier this week at the joint committee hearing on the draft Online Safety Bill, the FCA’s executive director of enforcement and market oversight, Mark Steward, said social media firms should be forced to stop financial adverts by implementing “systems and controls”.
The FCA has repeatedly pressed the government on a legislative crackdown on paid-for online ads, but so far the government has refused to include the ads in its bill, though its proposed legislation covers some financial harms.
Instead, the government said there would be a consultation on online advertising regulation later in the year.
Nikhil Rathi, chief executive of the FCA, said: “The annual perimeter report is an important part of our accountability to parliament, particularly the treasury committee.
"The FCA is committed to being more innovative, assertive and adaptive. That means being more proactive at the limits of our regulation, working with partners and other agencies where we don’t have powers and setting out where we believe more powers are necessary.
“We see real risks to consumers from outside our remit from both online advertising and from those using exemptions to sell products to ordinary customers. Change is needed and we will continue to push for powers where we need them.”
The FCA has called again for amendments to the financial promotions order relating to ‘high net worth’ and ‘sophisticated’ investors.
Current rules on who is classed a sophisticated investor mean more ordinary investors are at risk of receiving financial promotions, including for high-risk products, that don't have to comply with the FCA's rules, including the requirement to be clear, fair and not misleading, and mass-marketing bans, the regulator warned.