Compliance

Compliance Corner: FCA Tightens Screws On Promotions, Adverts

Editorial Staff 7 December 2022

Compliance Corner: FCA Tightens Screws On Promotions, Adverts

The latest compliance news: regulatory developments, punishments, guidance, permissions and new product and service offerings.

The Financial Conduct Authority in the UK has proposed new measures to clamp down on illegal, unfair or misleading financial marketing.  

The regulator yesterday set out new checks for those firms which want to approve financial promotions. The new measures will require firms to demonstrate that they have the right expertise for the promotions they wish to approve, it said in a statement.  

At present, any FCA-authorised firm may 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 are allowed to approve financial promotions, giving the FCA greater oversight to stop harm before it occurs. 

The move comes at a time when watchdogs such as the FCA keep trying to stamp out dishonest and misleading promotional campaigns. For example, the regulator is keen to tighten controls on areas such as risky investments and “buy now pay later” deals. The FCA is also concerned at the proliferation of misleading advertisement campaigns on social media.

“Social media and online advertising means that 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 good financial decisions. This is especially important as we face the rising cost of living,” Sarah Pritchard, executive director, markets said.

The FCA said that firms will also be required to regularly report back to it about financial promotions which they have approved, helping the FCA crack down on rogue adverts. 

The FCA has tightened rules on advertising for high-risk investments and gone more aggressively after misleading adverts, removing, or amending more than 5,000 financial promotions from authorised firms between January and October this year, compared with 564 in 2021. 

“Accountable financial advertising will be a recurring theme for the FCA in 2023 and today's news is a continuation of the Consumer Duty and commentary of that paper," Alain Desmier, managing director of Contact State and author of Data Control Matters – a report into data consent within financial services, said. "The financial regulator wants to see firms create more robust sign-off procedures of financial promotions and will achieve its aims through direct intervention, firm and control function accountability. In black and white, if you run the marketing and/or compliance function of a financial firm, these proposals (CP22/27) should feature in your New Year's resolutions."

“Lead generation for products like insurance and mortgages is classified as financial promotions and so this document also applies to anyone buying or creating leads. Compliance does not need to be onerous or scary, firms just need to keep a real-time record of the adverts and landing pages that are being used to create consumer leads they are speaking to," he added.

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