FCA sends “Dear CEO” letter about financial promotions

Maria Nikolova

The UK regulator has recently become aware of firms issuing financial promotions which suggest that all of the activities which they undertake are regulated when, in fact, they are not.

The latest “Dear CEO” letter by the Financial Conduct Authority (FCA), published earlier today, focuses on the use of financial promotions.

The letter is sent after the FCA has recently become aware of firms issuing financial promotions which suggest or imply that all of the activities which they undertake are regulated by the FCA and/or the PRA when, in fact, they are not. The main purpose of the letter is to remind firms’ senior managers and boards of what constitutes fair, clear and unambiguous financial promotions.

Part of meeting the standard for fair, clear and not misleading promotions includes ensuring that (where relevant) those to whom a financial promotion is addressed understand the extent of the relevant firm’s business that is regulated.

Some of the firms that the FCA regulates undertake both regulated and unregulated business. As some firms issue financial promotions which suggest all of the activities they undertake are regulated by the FCA and/or the PRA when, in fact, they are not, the FCA warns that these financial promotions are unlikely to provide consumers with the necessary clarity. Put otherwise, such ads could leave consumers unable to understand whether the products or services which are promoted are regulated by the FCA and/or the PRA.

The UK regulator reiterates that if a firm names the FCA and/or the PRA as its regulator in a financial promotion that refers to aspects of its business (e.g., products or services) which are not regulated by the FCA and/or the PRA, then the promotion should make clear those aspects which are not regulated.

Firms are also reminded:

  • of the rule in GEN 4.5.4R which states that “a firm must not indicate or imply that it is regulated or otherwise supervised by the FCA in respect of business for which it is not regulated by the FCA”; and
  • that before they approve a financial promotion for communication by an unauthorised person, they must confirm that the promotion complies with the FCA rules on financial promotions. This includes ensuring that the financial promotions which they approve are fair, clear and not misleading.

The FCA notes that it monitors adverts across different media in the UK. Firms are also reminded that the FCA has the power under section 137S of FSMA to direct a firm to withdraw an advert (or its approval of an advert), or to prevent it from being used in the first place.

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