The FCA has published a new webpage on risk warnings for mainstream investments, covering expectations on firms promoting investment products and common misconceptions about risk warnings.
The FCA highlights the general ‘clear, fair and not misleading’ obligation, and highlighted the following misconceptions:
- There is no prescribed risk wording for mainstream investments, and behavioural testing has suggested that only stating ‘capital at risk’ is often ineffective;
- There is no requirement for mainstream investment promotions to include a separate risk warning from the main body of the promotion. They must provide a balanced view of the benefits and risks, to give consumers a fair description of the product or service;
- The FCA does not mandate how firms should order their promotions – messaging may be ordered however best supports consumer understanding, but there is no explicit requirement for risks to come first;
- Image advertising, such as branding, does not need information about risks; and
- Promotions must be standalone compliant, which means firms need to ensure consumers see the right information at the right time, and are equipped to make effective, timely and properly informed decisions. However, this does not require generic, repeated risk disclosure on every page.