UK’s FCA Plans to Tighten Control Over Promotions of High-Risk Investments

Through a discussion paper published this month, the FCA is seeking opinions from the financial services sector about online offers of high-risk investments.

Actually, the Financial Conduct Authority launched the call for inputs last September 2020, to help shape the rules that the UK regulator plans to implement this year. The deadline set for the submission of feedback is set on July 01, 2021.

Although the FCA has recently published specific rulings over high risk financial products, the regulator admits to having limited power in pulling the reins over online brokers of high risk investments that are not registered with the FCA. Apparently, the FCA is referring to the offshore-licensed brokers that furnish web-based trading platforms.

The need to tackle the matter comes in the wake of numerous complaints coming from consumers who lost all their money on high-risk investment opportunities found and accessed online. In 2020, the FCA published a cautionary message to UK citizens about the risks of investing on financial products offering high returns, specifically those found by way of Google or Bing search engines, as well as those endorsed by influencers in Facebook and Youtube.

Specific Inputs or Feedback that the FCA Needs from Financial Services Firms

To make sure the new set of rules that the regulator will implement as protection for UK consumers, will be feasible for members of the financial services sector, the FCA is asking for views on three areas:

Views on whether the classification of high-risk investments should be subject to marketing restrictions. If so, views must include suggestions on the kind of restriction to apply.

Opinions on rules that would separate the high-risk investment market , as the regulator is concerned about the growing number of consumers investing in unsuitable high-risk investments.

Feedback about rules covering the responsibilities assumed by firms that support the financial promotions, particularly of unauthorised players in the country’s financial services industry. Firms like Google, Bing and online social media sites who approve the publishing of financial promotions of unlicensed endorsers, will play an important role in helping the FCA ensure that such promotions meet the standards in place.

Our Suggestion to UK Consumers

The FCA’s message of warning to UK consumers included reminders for them to carefully scrutinise those who offer investment opportunities found by way of search engines and social media sites, to make sure they are licensed by the FCA.

Our suggestion is to check out these financial intermediaries by way of online reviews that include information on whether the offshore-licensed broker is also a holder of an FCA license. We for one, gather information from the AskTrader website, whose team of analyst performs a review of robo-advisors and online trading platforms popular to UK citizens.

Our own research shows that FCA-licensed robo advisor platforms like True Potential Investor, invest only in traditional financial products, like corporate stocks, bonds, mutual funds and equity traded funds (ETF) on marketable securities and precious commodities. We gathered the same information from other true potential reviews we found online.