The financial watchdog launched a consultation paper – CP22/27 – outlining more stringent checks for those firms which want to approve financial promotions, ensuring they have the right expertise to sign off the material.
Under current legislation, any FCA-authorised firm is allowed to approve financial promotions on behalf of other firms who are not authorised by the regulator. Changes being introduced by Parliament will require authorised firms to undergo new screening checks before they can sign off advertising or other promotional material, giving the FCA greater oversight to stop harm before it occurs.
Firms will also be required to regularly report back to the FCA on financial promotions they have approved, giving the regulator higher visibility, earlier in the process.
The proposed reforms are targeted to allow the FCA to act quickly to put a stop to harmful financial promotions communicated by unauthorised firms, including in areas such as high-risk investments and Buy Now Pay Later (BNPL).
Consultation scope
The proposals in this paper will affect authorised persons who approve, or intend to approve, financial promotions for unauthorised persons.
However, based on the Treasury’s consultation response document, the regulator confirmed this will not be relevant to authorised persons approving the financial promotions of their appointed representatives (ARs) or of unauthorised persons within their own corporate group.
The regulator said: “We also do not expect them to apply where an authorised person approves their own financial promotions for onward communication by an unauthorised person.”
Sarah Pritchard, executive director, Markets at the FCA, said: “Social media and online advertising mean consumers are taking less time between seeing a promotion and making a financial decision. It is, therefore, essential that they are equipped with the right information at the right time so that they can make those decisions. This is especially important as we face rising cost of living.
“These proposals will ensure those approving ads have the appropriate expertise and are held accountable for the promotions they sign off.”
The FCA removed or amended over 5,000 financial promotions from authorised firms between January and October this year, against 564 in 2021.
The consultation is open until 7 February 2023.
The regulator invites all to send any comments or enquiries to CP22-27@fca.org.uk
