Treasury urged to regulate financial promotion approvals
Proposals to give the Financial Conduct Authority (FCA) greater powers over financial promotions have been backed by the wealth management and financial advice industry, but there are calls for the changes to go further.
The Treasury launched a consultation in July warning that the current requirement for an authorised firm to approve the financial promotion of an unauthorised firm does not go far enough.
The accuracy of financial promotions surrounding mini-bonds has been a persistent issue and was raised in the collapse of Basset & Gold and London Capital & Finance.
The government has instead proposed establishing a regulatory ‘gateway’ so any firm wishing to approve the financial promotions of unauthorised firms would first need to obtain the consent of the FCA.
The Personal Investment Management & Financial Advice Association (PIMFA) initially opposed this move but has said instead the act of approving financial promotions should be a regulated activity.
“Given the potential for harm for consumers, and the cost that then falls onto firms in funding the Financial Services Compensation Scheme, we believe that it is right that a gateway is introduced for the approval of financial promotions,” Simon Harrington, senior policy adviser at PIMFA, said.
“However, as a result of the experience of many of PIMFA’s member firms of being regulated, we retain very little confidence that the level of regulatory oversight required in supervising the authorisation of financial promotions will be sufficient to prevent a reproduction of the current regime which, as the Treasury quite rightly notes is not sufficient and conducive to consumer harm.”
“Making the approval of financial promotions a regulated activity would mean the FCA could take enforcement action against those firms that approve unsuitable investments without having the necessary expertise to do so.”
