Harry WellsThe FCA has published the findings of its review into how crypto firms have complied with financial promotion rules introduced in October 2023. In particular, the FCA analysed the application of ‘back end’ rules including the 24-hour cooling off period, personalised risk warnings, client categorisation, and appropriateness assessments.
The FCA has published its findings in the form of examples of good and poor practice.
Examples of good practice include:
- firms giving clear information about the required cooling off period for new consumers requesting a direct offer financial promotion;
- positioning personalised risk warnings to new consumers which made it the sole focus of the consumer;
- verifying consumer categorisations of certified-sophisticated investors, rejecting those which did not meet requirements; and
- grouping appropriate assessment questions into specific topics which cover the full breadth of the assessment.
Examples of poor practice include:
- providing no reasoning for the cooling off period requirement;
- downplaying risks in the personalised risk warnings;
- re-naming categories in client categorisation to downplay investment risks; and
- allowing customers to pass appropriateness assessments when they have answered fundamental questions incorrectly.
The FCA also found that firms have been using industry comparisons as a method for gauging the level of compliance required. However, the FCA encourages firms not to rely on this but instead to engage with the FCA directly.