Financial promotions quarterly data 2023 Q1

0 s137S (the Banning Power) directing a firm to withdraw financial promotions

0 Own Initiative for Imposition of Requirements (OIREQs) were approved, restricting the firms’ ability to communicate or approve financial promotions

10 Voluntary Applications for Imposition of Requirements (VREQs) were approved, restricting the firms’ ability to communicate or approve financial promotions

A firm was referred to us by the Financial Ombudsman Service due to an outstanding award of £70,000, where a consumer was told their funds had been invested in a bond. We had concerns whether the firm could be effectively supervised and held appropriate resources. We imposed restrictions on the firm because we found no evidence that the money transferred by the consumer was invested in a bond or any other form of investment.  Some of the funds were also transferred into a personal account of the Director. 

Our actions included freezing the firm’s bank account and its permissions to carry out regulated activities were cancelled. 

We identified that a credit broking firm had an excessive number of trading names. Websites linked to the trading names promoted FX and Crypto trading platforms and listed the parent firms regulated status, despite it only having limited credit broker permissions. We found that no regulated activity had been undertaken in the previous 12 months and we were unable to engage with the Senior Management Function (SMF) directly.

We had all trading names removed from the Financial Services Register and all reference to the parent firm has been removed from the trading name websites. The firm is now being processed using our ‘use it or lose it’ initiative.

A debt packager firm was using a trading name which could potentially mislead consumers that it was a not-for-profit organisation or part of a government scheme. Consumers are unlikely to realise they were directed to a fee-paying service rather than free debt advice.  Firms should not use trading names which mislead on the nature of the services they offer. Following our intervention, the firm agreed to remove the trading name and all associated promotional material

We will continue to focus on monitoring firms’ use of trading names and act where we identify misuse. Firms should review October 2022’s Regulation Round-Up and our website on how they may be used appropriately.

Due to the rising cost of living, we have been focusing on firms that appear to be providing unauthorised debt advice to consumers. Where we have identified a breach of our regulatory perimeter, we have engaged with 19 unauthorised firms and have issued 9 alerts. Our work remains ongoing, and we will continue to work to prevent harm to consumers in this area.

A debt firm whose target market are likely to display vulnerable characteristics, was misleading consumers by suggesting they could become debt free without incurring any costs. The firm provides free debt advice, but the different debt solutions on offer are not free. We also found that the firm was:

• using their regulated status in a promotional manner
• not signposting to MoneyHelper in a prominent or complete way
• using Google Ad promotions for debt solutions in an unsuitable way due to restricted space for key messages

Following our engagement, given the scale and severity of the breaches, the firm applied for the imposition of a voluntary requirements (VREQ) which we agreed to.

The firm withdrew their financial promotions and did a review of their systems and controls for their marketing of financial promotions.

We reviewed a sample of firms that have previously been involved in the distribution of Speculative Illiquid Securities (SIS) including mini-bonds, to find out what exposure, if any, these firms still have and the amount that remains outstanding.  Our review identified examples of SIS, not being fully repaid at maturity. Instead, those investments were: ‘rolled over’ by either:

• being placed into a new SIS, or other form of debt security
• converted into equity
• the maturity date extended.

We are concerned that these events could cause consumer harm as the investor cannot access their money as originally expected. If rollovers are considered necessary, we expect firms to communicate with investors in advance, about the impact this will have on them. Given the potential for consumer harm, we also expect the firm to promptly submit a SUP 15 notification.

We also saw examples of investors being incorrectly categorised as high net worth or sophisticated. All firms involved in the distribution or issuing of SIS must ensure they have robust processes in place to categorise investors correctly. These responsibilities remain with the firm even if it outsources client categorisation processes to a third party (e.g., when using a ‘white-labelled’ platform).

An insurance firm used an inappropriate image in its marketing campaign for life insurance. We viewed this promotional content as breaching a number of our principles, including ‘integrity’ and ‘management and control’. The firm immediately received many complaints about the promotion and removed it.

Our intervention centred on the systems and controls and questionable taste and decency, and the firm agreed to cease to communicate any further financial promotions that had not received prior approval from the product manufacturer (or co-manufacturer) or another authorised person, under section 21 of FSMA. 

We found a peer-to-peer firm, who were providing high-cost short term credit and investment opportunities, in breach of several financial promotion rules across its Google Ads, Facebook sponsored Ads and on its website. The promotions were missing important risk warnings, the representative annual percentage rate (“RAPR”), it implied immediacy of funds and used potentially misleading language, headlines and illustrations.

Given the number of breaches, the firm applied for the imposition of a VREQ which we agreed to, and withdrew all non-compliant financial promotions. The firm also undertook a review of its systems and controls, policies and procedures in relation to financial promotion activity. The firm also signed an attestation, formally taking accountability for carrying out the actions we required.