FCA sets out proposals to strengthen its financial promotion rules for high-risk investments



Following feedback to its Call for Input (CFI) on Consumer Investments, the Financial Conduct Authority (FCA) has published proposals to strengthen its financial promotion rules for high-risk investments to help retail investors make more effective decisions.

The discussion paper (DP) seeks views on three areas where changes could be made to address harm to consumers from investing in inappropriate high-risk investments.

The three areas of focus are the classification of high-risk investments, the segmentation of the high-risk investment market and the responsibilities of firms that approve financial promotions.

The feedback to this DP will help shape the rules the FCA plans to consult on later in the year, ensure they are feasible for firms to implement and that they have the intended impact.

Sheldon Mills, executive director, consumers and competition at the FCA, said:” We have been clear that we want to deliver a consumer investment market that works well for the millions of people who stand to benefit from it. We are concerned that too often consumers are investing in high-risk investments they don’t understand and can lead to significant and unexpected losses.

“We have already taken action by banning the mass-marketing of speculative mini-bonds. We continue to address harm in this market through our ongoing supervisory and enforcement action but recognise more needs to be done. Our latest proposals would further reduce the risk of people taking on inappropriate, high-risk investments that don’t meet their needs.”

Preventing harm in the consumer investment market is a priority for the FCA. Recent research it commissioned on self-directed investors identified a growing trend of retail investors choosing to invest in inappropriate high-risk investments that do not meet their savings goals and investment needs. This can lead to significant and unexpected investment losses. The research found that over 4 in 10 (45%) did not view ‘losing some money’ as a potential risk of investing.

The discussion paper focuses on three main areas where the FCA intends to strengthen its financial promotion rules to help investors make more effective decisions that meet their savings and investment needs:

  • The classification of high-risk investments.
  • Further segmenting the high-risk investments market.
  • The approval of financial promotions.

The FCA is inviting feedback on its discussion paper by 1 July 2021. It will consider the feedback received alongside further analysis and testing, and intends to consult on rule changes later this year.

The feedback received is important to help it understand what is feasible for firms to implement, how to strike the right balance between protecting consumers and consumers taking responsibility for their own actions, and identifying any unintended consequences of these changes.

The FCA will publish a full response to its CFI on consumer investments, alongside the next steps on its wider consumer investments strategy, later in the year.



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