FCA clamps down on marketing of high-risk investments to consumers

The FCA has finalised stronger rules to help tackle misleading adverts that encourage investing in high-risk products. 

Under the stronger rules, firms approving and issuing marketing must have appropriate expertise, and firms marketing some types of high-risk investments will need to conduct better checks to ensure consumers and their investments are well matched. 

Firms also need to use clearer and more prominent risk warnings and certain incentives to invest, such as ‘refer a friend bonuses’, are now banned. 

As part of its Consumer Investments Strategy, the FCA want to reduce the number of people who are investing in high-risk products that do not reflect their risk appetite. 

This follows concerns that a significant number of people who invest in high-risk products do not view losing money as a risk of investing and invest without understanding the risks involved. 

These new rules build upon the FCA’s more assertive and interventionist approach to tackling poor financial promotions, reducing the potential for unexpected consumer losses. 

In the last year we have intervened in significantly more financial promotions to prevent harm. In the year to the end of July 2022, 4226 adverts were amended or withdrawn after intervention from the FCA. 

The new rules will not apply to cryptoasset promotions. Once the Government and Parliament confirms in legislation how crypto marketing will be brought into the FCA's remit, the FCA will publish final rules on the promotion of qualifying cryptoassets. These rules are likely to follow the same approach as those for other high-risk investments. Crypto remains high risk so people need to be prepared to lose all their money if they choose to invest in cryptoassets. 

Sarah Pritchard, Executive Director, Markets said: 

We want people to be able to invest with confidence, understand the risks involved, and get the investments that are right for them which reflect their appetite for risk. 

Our new simplified risk warnings are designed to help consumers better understand the risks, albeit firms have a significant role to play too. Where we see products being marketed that don’t contain the right risk warnings or are unclear, unfair or misleading, we will act. 

This is even more important now because increases in the cost of living could prompt people to chase higher investment returns which may prove risky.'

The FCA has also launched a consultation which could see Long Term Asset Funds (LTAFs) marketed to a wider group of retail investors and schemes in future.  

The proposals out for consideration would provide access to non‑traditional investments, which consumers might use to diversify their portfolio and for potentially higher returns, while still offering strong consumer protection. The FCA is inviting feedback on this by 10th October 2022 and will confirm its final rules early next year. 

Notes to editors

  1. PS22/10: Strengthening our financial promotion rules for high-risk investments and firms approving financial promotions (PDF)

  2. CP22/14: Broadening retail access to the long-term asset fund (PDF)  

  3. CP22/2: Strengthening our financial promotion rules for high risk investments, including cryptoassets (PDF)

  4. HMT Consultation Response on cryptoasset promotions 

  5. Consumer investment strategy 

  6. BritainThinks: Research on understanding self-directed investors 

  7. The Treasury’s consultation on reforming the financial promotion exemptions for high-net worth and sophisticated investors

  8. Behavioural research: Improving outcomes for consumers considering investing in high-risk investments 

  9. Enabling consumers to help themselves is a key commitment in our new three-year strategy. Strengthening our financial promotions rules for high-risk investments will help ensure consumers have access to high-quality information and to understand the risks of their investments.  

  10. There will be an implementation period of four months for our main risk warning proposals. All other rules have an implementation period of six months before they come into effect. 

  11. Find out more information about the FCA.