UK tightens grip on FCA-authorized firms responsible for ads of unregulated entities

Rick Steves

“By introducing these new checks, we will ensure people approving adverts have the right skills and understanding they need to do so. Firms need to make sure people are equipped with the right information at the right time, so they can make properly informed decisions.”

In a move aimed at safeguarding consumers and ensuring the integrity of financial advertisements, the Financial Conduct Authority (FCA) is introducing new screening checks for firms responsible for approving financial adverts.

This proactive approach seeks to equip firms with the necessary skills and expertise to approve financial promotions accurately, promoting transparency and fairness while balancing risk and reward.

FCA takes aim at firms approving financial marketing on behalf of unregulated entities

The new regulations specifically target firms responsible for approving financial marketing on behalf of unregulated entities. To be eligible for this responsibility, firms must demonstrate their competence in comprehending the products being advertised, ensuring that promotions accurately represent the offerings and provide a balanced view of potential risks and rewards.

Previously, any firm authorized by the FCA had the authority to approve promotions for firms not regulated by the FCA. However, this practice has led to several issues, including approvals for products that firms don’t fully understand and promotions that lack clarity, fairness, or accuracy, causing harm to consumers.

To comply with the new rules, firms must submit applications to the FCA between November 6, 2023, and February 6, 2024. Those firms that have submitted applications can continue to approve adverts until they receive a decision on their application.

Additionally, firms responsible for approving financial promotions will now be required to provide regular reports on the promotions they have endorsed and any adverts for which approval has been withdrawn. This reporting mechanism will aid the FCA in swiftly addressing misleading advertisements and taking necessary enforcement actions.

People approving adverts must have the right skills and understanding

Sarah Pritchard, Executive Director of Markets at the FCA, said: “By introducing these new checks, we will ensure people approving adverts have the right skills and understanding they need to do so. Firms need to make sure people are equipped with the right information at the right time, so they can make properly informed decisions.”

These new measures align with the FCA’s three-year strategy, which focuses on setting and testing higher standards across financial services to empower consumers to make informed financial decisions based on accurate and relevant information. The Consumer Duty, a key part of this strategy, enhances consumer protection in financial services and emphasizes the need for consumers to receive communications that they can understand.

The FCA’s ongoing efforts to strengthen advertising rules for high-risk investments, revamp social media guidance for promoting financial products and services online, and remove misleading adverts all contribute to a more informed consumer base. Ultimately, these reforms are intended to support a thriving market that empowers individuals to invest and save with confidence.

The Financial Services and Markets Act of 2023 laid the groundwork for creating a new gateway for authorized firms to approve financial promotions for unregulated firms. A consultation on this new gateway was launched by the FCA in December 2022.

Firms should note that while applications can be made after the February deadline, approvals for adverts cannot be granted until the applications are reviewed. New entrants to the market will have the opportunity to apply as part of the standard authorization process.

For firms applying to approve financial promotions and more information about these regulatory changes, additional guidance and resources will be provided by the FCA.

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