Compliance Corner: FCA

Editorial Staff

2 May 2021

The UK’s financial regulator has fired a warning over the phenomenon of young investors playing in what it sees as high-risk areas such as cryptocurrencies and foreign exchange. The Financial Conduct Authority’s message comes after markets were roiled this year by traders using social media platforms to affect share prices in firms such as the US game retailer .

Research conducted among 517 self-directed investors from 18 August 2020 to 20 January 2021 found that “there is a new, younger, more diverse group of consumers getting involved in higher risk investments, potentially prompted in part by the accessibility offered by new investment apps.”

“There is evidence that these higher-risk products may not always be suitable for these consumers’ needs as nearly two thirds (59 per cent) claim that a significant investment loss would have a fundamental impact on their current or future lifestyle,” the , said.

Holly Mackay, chief executive of Boring Money, a platform providing information and data for retail investors, said: “Almost one million new investors started investing in 2020. Many of these first-time investors were accruing extra cash during the pandemic and spotted an opportunity to invest during a choppy year for financial markets.”

“However history tells us that new investors in bull markets can suffer from lack of diversification, backing high-risk investments as opposed to more pedestrian choices,” Mackay added.