Proposed new rules could protect investors from unregulated investment promotions

A scourge of the retail financial services profession are promotions for unregulated investments.

Dodgy financial products and cryptocurrency investments are readily marketed to unsuspecting consumers, due to a loophole in the regulations for financial promotions.

As things stand, an unauthorised firm can promote unregulated investments, as long as they find a regulated firm willing to sign-off on their advert.

But this inadequate system is set to change with new proposals designed to give consumers better protection against misleading and inadequate promotions.

City Minister John Glen published the proposals, in the form of two consultations, which will increase the oversight of financial promotions issued by unauthorised firms, and bring the promotion of certain types of crypto assets under Financial Conduct Authority (FCA) regulation for the first time.

The Economic Secretary to the Treasury & City Minister, John Glen said: “It’s important that people can understand the financial products they see promoted. If adverts by unauthorised firms are misleading, or don’t fully outline the risks, then people can end up losing money. That’s why we want to put more protections in place around such financial promotions, including the promotion of crypto assets, while continuing to ensure people have access to a wide range of products on the market."

“Currently, if an unauthorised firm wants to promote a particular financial product, they need to get that promotion approved by any authorised firm. But with the variety and vast quantity of products being offered on the market today, the government believes that this no longer provides a strong enough safeguard.

“Today’s proposals would mean that authorised firms will now have to obtain specific FCA consent to approve the financial promotions of unauthorised firms. This would mean the FCA can have better oversight of those firms which would help ensure such promotions are clear, fair, and not misleading.”

Under current rules, the promotion of crypto assets is unregulated. However, their proliferation, and the fact they are often targeted at retail investors, makes it essential for any promotions to underscore the risks involved.

By proposing to bring the promotion of crypto assets into the perimeter of the financial promotion’s regime, promotions of these high-risk schemes will face higher standards for fairness, clarity and accuracy, as already applies to traditional financial services promotions.

Both consultations will run until 25th October.

Whilst it could be argued that there may sometimes be a place for unregulated investments for high net worth and sophisticated investors, the danger for most consumers is that, having seen a promotion for an unregulated product, they don’t then bother to get advice from a regulated financial adviser.

So, if in doubt, talk to Kellands!

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