The FCA is stepping up its regulatory work to protect consumers from illegal, unfair or misleading financial promotions. Firms must now demonstrate that they have the right expertise for the financial promotions they wish to publish.

Under current legislation, any FCA-authorized firm can approve financial promotions on behalf of any other unauthorized firm. The new changes will require authorized firms to undergo new screening checks before they are allowed to approve financial promotions, which gives the FCA a better chance to prevent harm before it occurs.

“Social media and online advertising means that consumers are taking less time between seeing a promotion and making a financial decision. It is, therefore, essential that they are equipped with the right information at the right time so that they can make good financial decisions. This is especially important as we face the rising cost of living,” said Sarah Pritchard, Executive Director, Markets at FCA.

Report back to FCA

Firms will also have to report back on any financial promotions they have approved, which will help the regulator to crack down on bad adverts.

With the proposed reforms, the FCA will be able to act quicker to stop harmful financial promotions by unauthorised firms, including high-risk investments and buy-now-pay-later schemes.

“Social media and online advertising means that consumers are taking less time between seeing a promotion and making a financial decision. It is, therefore, essential that they are equipped with the right information at the right time so that they can make good financial decisions.”

Sarah Pritchard, Executive Director, Markets FCA

“These proposals will ensure those approving ads have the appropriate expertise and are held accountable for the promotions they sign off, ” said Pritchard.

Removing adverts

These new rules are a part of the FCA’s work to strengthen rules around advertising for high-risk investments, and show the regulator is determined to remove misleading adverts. This year, the FCA removed or amended over 5,000 financial promotions from authorised firms between January and October, compared to 564 in 2021.

The FCA’s proposed changes are subject to legislation. The Financial Services and Markets Bill proposes to amend the Financial Services and Markets Act 2000 (FSMA) to create a new regulatory gateway for authorised firms approving financial promotions. The consultation is open until February 7, 2023.