Financial Conduct Authority  

FCA cracks down on promotions after 164 cases fall foul of rules

FCA cracks down on promotions after 164 cases fall foul of rules

The Financial Conduct Authority has proposed new screening checks for authorised firms after finding at least 164 cases concerning promotions about retail investment products have fallen foul of its rules over the past three years.

Between 2019 and 2022, the FCA recorded at least 31 cases where a total of 59 promotions were flagged with regulated firms for being non-compliant.

Over the same period, the FCA said it asked social media pages to be taken down in a further 133 cases relating to unauthorised firms spread across Instagram (96), Facebook, and TikTok (3).

Article continues after advert

The data, retrieved through a Freedom of Information request, was sent to FTAdviser last week (December 1).

Today (December 6), the FCA said changes being introduced by parliament will require authorised firms to undergo new screening checks before they are allowed to approve financial promotions in an effort to "crack down" on rogue financial promotions.

Under the proposed changes, firms would be required to regularly report back to the FCA on financial promotions they have approved.

Current legislation allows any authorised firm to approve financial promotions on behalf of non-authorised firms.

"Social media and online advertising means that consumers are taking less time between seeing a promotion and making a financial decision," said executive director for markets at the FCA, Sarah Pritchard.

"These proposals will ensure those approving ads have the appropriate expertise and are held accountable for the promotions they sign off."

The FCA has published a consultation paper on the changes, asking firms for responses before February 7, 2023.

Dubbed "a new regulatory gateway", the screening checks will form part of the financial services and markets bill which was introduced to parliament back in July by the Treasury.

In its consultation paper, the regulator said it had seen examples of authorised firms approving financial promotions for products which were "completely unrelated" to the firm’s permissions and areas of expertise.

The current system, the regulator said, runs the risk of authorised firms approving promotions which are misleading, inaccurate or inappropriate for the intended consumers because the approving firm does not have sufficient understanding of the relevant product or service.

"We have identified cases where authorised firms have approved financial promotions which do not comply with our rules because the approving firm has not undertaken sufficient due diligence for the product or service being promoted to be able to properly assess the promotion before approval," the FCA said.

'Misleading' claims

Back in February, the FCA ordered authorised investment platform Freetrade to remove all paid-for social media influencer posts after an influencer suggested consumers in debt could use the platform to make money.

The City watchdog concluded that the posts were "misleading" as there was no guarantees that any investment would result in positive gains in the short or long term.

In the majority of cases where regulated firms have been in breach due to their social media posts, the FCA has not published notices.