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The UK's Financial Conduct Authority has strengthened rules to help tackle misleading adverts that encourage investing in high-risk products. 

Under the move, firms approving and issuing marketing standards must have the right expertise, whilst those marketing some types of high-risk investments will need to conduct better checks to ensure that consumers and their investments are well matched, the FCA said in a statement. 

Firms also need to use clearer and more prominent risk warnings and certain incentives to invest, such as ‘refer a friend bonuses,’ are now banned, the FCA added. 

As part of its Consumer Investment Strategy, the FCA wants to reduce the number of people who are investing in high-risk products that do not reflect their risk appetite. 

This follows concerns that a significant number of people who invest in high-risk products do not view losing money as a risk of investing and invest without understanding the risks involved, the FCA explained. 

These new rules build upon the FCA’s more interventionist approach to tackling poor financial promotions, reducing the potential for unexpected consumer losses. 

In the last year, the FCA said it has intervened in significantly more financial promotions to prevent harm. In the year to the end of July 2022, 4226 adverts were amended or withdrawn after intervention from the FCA, it said. 

The new rules will not apply to cryptoasset promotions, the FCA added. Once the government and parliament confirm in legislation how crypto marketing will be brought into the FCA's remit, the FCA said it will publish the final rules on the promotion of qualifying cryptoassets. These rules are likely to follow the same approach as those for other high-risk investments. Crypto remains high risk so people need to be prepared to lose all their money if they choose to invest in cryptoassets, the FCA stressed. 

Welcoming the move, Sarah Pritchard, executive director, markets said: “We want people to be able to invest with confidence, understand the risks involved, and get the investments that are right for them which reflect their appetite for risk.” 

“Our new simplified risk warnings are designed to help consumers better understand the risks, albeit firms have a significant role to play too. Where we see products being marketed that don’t contain the right risk warnings or are unclear, unfair or misleading, we will act,” she explained. 

“This is even more important now because increases in the cost of living could prompt people to chase higher investment returns which may prove risky,” she added.  

The FCA said it has also launched a consultation which could see Long Term Asset Funds marketed to a wider group of retail investors and schemes in future. 

The proposals out for consideration would provide access to non-traditional investments, which consumers might use to diversify their portfolio and for potentially higher returns, while still offering strong consumer protection.

The FCA said it is inviting feedback on this by 10 October 2022 and will confirm its final rules early next year.