FCA reveals new rules for high-risk product marketing

The UK financial watchdog has proposed what it describes as a “significant strengthening” of regulation around the marketing of high-risk financial products.

The announcement comes after the government published plans to strengthen the rules on cryptoasset advertisements and protect consumers from misleading claims. It said that it plans to introduce legislation to address misleading cryptoasset promotions.

The Financial Conduct Authority (FCA) said that new rules would ensure firms that approve and communicate financial marketing have relevant expertise and understanding of the investments being offered, improve risk warnings on ads and ban incentives to invest, for example new joiner or refer-a-friend bonuses.

“Too many people are being led to invest in products they don’t understand and which are too risky for them,” said Sarah Pritchard, executive director of markets, FCA. “People need clear, fair information and proper risk warnings if they are to invest with confidence, which is the central aim of our consumer investment strategy.”

Under the proposed rules, customers looking to make high-risk investments would also be asked more robust questions about their knowledge and investment experience, after research by the authority found many consumers are investing without being aware of risks.

The FCA’s draft rules also include proposed restrictions on the marketing of cryptoassets, in preparation for the government bringing the promotion of these high-risk investments under the FCA’s remit.

The regulator said that once cryptocurrencies become its responsibility, it plans to categorise qualifying cryptoassets as ‘Restricted Mass Market Investments’, meaning consumers would only be able to respond to cryptoasset financial promotions if they are classed as restricted, high net worth or sophisticated investors.

Firms issuing such promotions would have to adhere to FCA rules, such as the requirement to be clear, fair, and not misleading.

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