FCA clamps down on financial advertising
The Financial Conduct Authority (FCA) has launched a crackdown on financial advertising amid concerns about how easy and fast people can make high-risk investments, particularly in cryptocurrency investments. Incentives to invest, such as refer-a-friend bonuses or new joiner giveaways, will be banned under the proposed reforms, which also includes toughening up the rules around financial marketing and risk warnings. High-risk investments like mini-bonds or peer-to-peer loans will also be affected by the new rules. The FCA aims to provide clear, fair information and proper risk warnings to help consumers invest with confidence.
High-risk investments pose a threat to consumers
In the past few years, there has been a proliferation of advertising of largely unregulated, high-risk investments, such as cryptoassets. This has led many people to invest in products they do not understand or are not well-suited to meet their goals. Digital wealth manager Nutmeg’s Kat Mann believes there needs to be a level playing field where firms promoting high-risk investments adhere to the same rules as FCA-regulated businesses to help consumers understand the risks of their investment choices.
Rules will affect all high-risk investments
The new rules do not apply to regulated businesses offering investments such as shares or ETFs. They have been targeted at firms offering cryptocurrency investments, but will apply to other high-risk investment marketing. The advertising of crypto is also set to come under the control of the FCA, as announced by Chancellor Rishi Sunak the day before the regulator launched this crackdown. The UK’s Advertising Standards Authority has also launched its own crypto crackdown recently.
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