The Financial Conduct Authority is clamping down on rogue investment promotions with proposed tougher new advertising rules.
These rules, which it is currently consulting on, ai to make it harder for financial promotions and advertisements to be approved, and it is hoped will stop ‘influencers’ and other unauthorised people touting rogue investment schemes.
The FCA said it is concerned about the number of people being lured into invested in high-risk schemes which include crypto-trading without being aware of the risks involved. As a result the regulator plans to have more oversight of the adverts and promotions that are put out to advertise all manner of investments.
This will also include a tightening of the rules around companies promoting ‘buy now pay later’ products.
It remains to be seen whether these proposed rules will impact the promotion of legitimate financial products, including pensions. There has been concerned in the past about whether actin take by companies, for example to promote workplace pensions and related product could fall foul of FCA rules around promotions and advice.
AJ Bell head of personal finance Laura Suter says: “The FCA has been slow to move on tackling the huge number of social media posts luring people into investing in high-risk schemes or crypto trading without stating the real risks involved. Its latest move is to have more oversight of the adverts and promotions that are put out to advertise all manner of investments.
“Alongside this the regulator wants to squeeze the Buy Now Pay Later market and ensure that people fully understand the risks of using the products. Currently many people using BNPL aren’t aware that it’s even debt or the impact that missing payments will have – and the FCA wants these points made much clearer on the marketing material.
“It’s timely that the regulator is putting this out now. During the cost of living crunch and expected recession it’s inevitable that more people will turn to alternative forms of debt or drawn into high-risk investment schemes, or even outright scams, with the promise of high returns.
“However, the scope of the FCA only goes so far. The changes it is making will do little to stop outright scammers who lure people in through social media with promises of high returns from investments only to steal all their money. It also can’t do much about the mini-bond sector, as it doesn’t regulate these ‘non-transferable securities’.”