The Treasury has proposed giving the Financial Conduct Authority (FCA) greater powers over financial promotions.
A consultation launched by the government warns that the current requirement for an authorised firm to approve the financial promotion of an unauthorised firm does not go far enough.
The Treasury said there is no specific process through which a firm must be assessed as suitable and competent before it is able to approve the financial promotions of unauthorised firms.
It has proposed establishing a regulatory ‘gateway’, which a firm must pass through before it is able to approve the financial promotions of unauthorised firms.
“Experience in recent years, however, suggests that the regime needs additional safeguards to ensure that approval by an authorised person is a genuinely effective means of ensuring that consumers are protected from deficient or potentially harmful financial promotions,” the consultation said.
“The FCA has identified a number of cases of authorised firms failing to satisfy its requirements in approving the financial promotions of unauthorised persons.
“This includes cases in which the approving firm has failed to undertake adequate due diligence to ensure promotions it has approved meet FCA requirements and instances of firms approving financial promotions which relate to products which are beyond their sphere of expertise.”
The document warns a number of consumer harms can result from financial promotions which are misleading, unclear or are not fair.
“Any firm wishing to approve the financial promotions of unauthorised firms would first need to obtain the consent of the FCA,” the consultation said.
The consultation closes on 26 October.