FCA reveals scale of crackdown on financial promotions in 2021
Authorised firms felt the full weight of the City regulator’s scrutiny last year, with the number of financial promotion interventions increasing by 272.46 per cent, year on year.
According to the latest financial promotions data compiled by the Financial Conduct Authority (FCA), the regulator took action against 132 authorised firms last year, resulting in the withdrawal or amendment of 564 financial promotions. By contrast, during the previous year the FCA intervened on 207 financial promotions being offered by 131 firms.
1,410 alerts were issued by the regulator to unauthorised firms and individuals regarding unsuitable financial promotions in 2021 – an increase of 18 per cent from 2020.
Retail investments and retail lending promotions accounted for 77 per cent of the FCA’s interventions with authorised firms last year. The most common breaches in the retail lending sector related to claims management companies and retail finance promotions.
Read more: FCA accused of “missing the point” on financial promotions
The use of social media influencers was also highlighted by the FCA as “becoming a concern for us”.
The regulator warned all firms to ensure that they have taken appropriate legal advice to understand their responsibilities prior to using influencers.
“For authorised firms, we use a range of tools available, including agreeing to voluntary or imposing own initiative requirements, requiring the firm which has communicated or approved the advert to withdraw it or change it so that it complies with our requirements,” the FCA detailed.
“In the most serious circumstances, we will use our powers…to ban a promotion or advert. Where we see repeated non-compliance with our rules, we expect these firms to conduct more detailed reviews and provide reports on these findings, particularly on their systems and controls in relation to their financial promotions.
“We may also ask firms to consider whether any customers may have acted on the non-compliant promotions and to take appropriate action to remedy any harm which consumers may have suffered as a result.”
On eight occasions last year, the FCA restricted an authorised firm’s ability to communicate or approve financial promotions – up from four in 2020. The regulator also restricted one firm’s ability to communicate or approve financial promotions.
Earlier this month, the FCA announced that it is planning to ban the promotion of investor incentives, such as new joiner or refer-a-friend bonuses, and will improve risk warnings on ads. It also wants to “ensure firms that approve and communicate financial marketing have relevant expertise and understanding of the investments being offered”.
Authorised firms which do not comply with the ban may face restrictions on their retail-facing products.
For unregulated firms, the FCA has the power to take “proportionate enforcement action”, including challenging firms and individuals’ activities via technical correspondence or publishing consumer alerts, and escalating the most egregious matters for investigation with a view to commencing civil, criminal and/or insolvency proceedings.
Read more: Four regulatory changes that could impact P2P this year