FCA finalises high-risk fin prom rules

FCA has published its policy statement with final rules on firms that are publishing promotions of high-risk products. The new rules will

  • require firms that are issuing and approving the materials to  have appropriate expertise;
  • impose greater obligations on firms to conduct checks to ensure consumers and investments are well matched;
  • require firms to use clearer and more prominent risk warnings – the main risk warning will be shorter, and firms can diverge from them if they have a good reason.  Alternative risk warnings will also be permitted for P2P investments and portfolios and where the activity of the product issuer/provider could be covered by the FSCS; and
  • ban certain incentives to invest, such as offers when a person refers a friend.

The rules also clarify what FCA means by a Direct Offer Financial Promotion and FCA will provide greater clarity on how firms can comply with the rules on these promotions and consumer journey rules.

Currently the new rules will not apply to marketing of crypto-assets, but FCA will amend the rules appropriately once the Government and Parliament have confirmed what regulatory powers FCA will have in this regard.

Changes to the rules will include:

  • new definitions of “non-mass market investment” and “restricted mass market investment”;
  • new rules in COBS 4.7,  4.12 and 4.14 setting out the new risk warnings and required summaries; and
  • new requirements in COBS 4.10 on approving financial promotions and a new section COBS 4.12A on promotion of restricted mass market investments and 4.12B on promotion of non-mass market investments

The rules on risk warnings will take effect from 1 December 2022, with the other rules taking effect on 1 February 2023.

Emma Radmore