FCA's New Checks Could Be a Game-Changer for Financial Ads

<p>According
to the UK market watchdog, advertisements are one of several key factors
leading to poor financial and investment decisions. Consequently, the Financial
Conduct Authority (FCA) is taking additional steps this year to ensure accurate
promotions as well as balance risk and reward for investors in the country.</p><p>FCA Presents New
Requirements for Ad Approvals</p><p>Previously,
any firm authorized by the FCA could approve ads for unregulated firms. This
leniency led to the approval of misleading or unclear advertisements in retail
trading. Now, firms must prove their competence in understanding the
products they are promoting. </p><p>The
application window for firms to comply with these new rules begins on 6 November
2023 and leads up to 6 February 2024. The new regulations will take effect on 7 February
2024. Firms that have applied within this window can continue to approve ads
until they receive a decision on their application. </p><p>Additionally,
these firms must submit regular reports on the ads they have
approved and any they have rejected due to concerns, enabling the FCA to act
swiftly against rogue advertisements.</p><blockquote><p lang="en" dir="ltr">To help people make informed decisions to <a href="https://twitter.com/hashtag/save?src=hash&amp;ref_src=twsrc%5Etfw">#save</a>, <a href="https://twitter.com/hashtag/invest?src=hash&amp;ref_src=twsrc%5Etfw">#invest</a> and borrow with confidence, we're introducing new screening checks for firms that approve financial adverts. <a href="https://twitter.com/hashtag/FinancialPromotion?src=hash&amp;ref_src=twsrc%5Etfw">#FinancialPromotion</a> <a href="https://twitter.com/hashtag/FinancialServices?src=hash&amp;ref_src=twsrc%5Etfw">#FinancialServices</a> <a href="https://t.co/HzKfOkBHkq">https://t.co/HzKfOkBHkq</a></p>— Financial Conduct Authority (@TheFCA) <a href="https://twitter.com/TheFCA/status/1701532143422194043?ref_src=twsrc%5Etfw">September 12, 2023</a></blockquote><p>"By
introducing these new checks, we will ensure people approving adverts have the
right skills and understanding they need to do so," Sarah Pritchard, the Executive
Director of Markets at the FCA, commented. "Firms need to make sure people
are equipped with the right information at the right time, so they can make
properly informed decisions."</p><p>The changes will affect a range of financial firms, including cryptocurrency entities such as Binance, super financial apps like Revolut, and other providers from the financial sector, including Adyen and Nubank.</p><p>As
mentioned earlier, this is not the first time in recent months that the UK
regulator has scrutinized financial products and services advertisements. The
desire to combat rogue financial ads was first discussed <a href="https://www.financemagnates.com/forex/fca-fights-with-rogue-financial-ads-outlines-new-rules/" target="_blank" rel="follow">at the end of 2022</a>,
and now the latest regulations are on the verge of being implemented.</p><p>A month
ago, <a href="https://www.financemagnates.com/institutional-forex/fca-cracks-down-on-rogue-financial-promotions-among-trading-firms/" target="_blank" rel="follow">the FCA released data</a> on financial promotions for the second quarter. The April to June 2023 data showed that the FCA's interventions led to 1,507
promotions being amended or withdrawn by regulated entities. In addition, the
FCA issued 400 alerts to unauthorized firms and individuals, 11% of which were
<a href="https://www.financemagnates.com/terms/c/clone/">clone</a> scams.</p><p>During the
previous year, the FCA blocked or forced changes <a href="https://www.financemagnates.com/fintech/uk-regulator-clamps-down-on-1400-more-rogue-financial-ads-in-2022/" target="_blank" rel="follow">to 1,400% more rogue financial
ads</a> than the year before.</p><p>FCA's Broader Strategy for
Consumer Protection</p><p>This move
is part of the FCA's three-year strategy to set higher standards across the
financial services sector. <a href="https://www.financemagnates.com/forex/consumer-duty-comes-into-effect-in-the-uk/" target="_blank" rel="follow">The 'Consumer Duty' </a>supports the strategy to enhance consumer protection by ensuring that people receive
understandable communications.</p><p>“This
latest move by the FCA is a manifestation of the Consumer Duty in action. It
represents a significant shift in its approach to financial promotions – it is
no longer enough for the approving firm merely to be appropriately authorized.
Now it must go further and actively demonstrate its competence to approve
specific financial promotions," Claude Brown, the Partner at Reed Smith, commented.</p><p>The
Financial Services and Markets Act 2023 has provisions for creating a new
gateway for firms wishing to approve ads for unregulated entities. This follows
a consultation launched by the FCA in December 2022. Firms can apply after the
February deadline but cannot approve ads until their application is processed.
New entrants to the market can apply as part of the standard authorization
process.</p><p>As part of
its latest efforts, the FCA aims <a href="https://www.financemagnates.com/forex/fca-to-control-finfluencers-and-illegal-promotions-on-social-media/" target="_blank" rel="follow">to regulate 'finfluencers'</a> and
illegal promotion on social media. The regulator is also <a href="https://www.financemagnates.com/cryptocurrency/fca-crypto-firms-face-significant-challenges-ahead-of-financial-promotions-regime/" target="_blank" rel="follow">alerting
cryptocurrency firms</a> that the latest regulations concerning the financial promotions regime will significantly impact their current operations and reminds them to adequately prepare for the implementation of the upcoming rules.</p>

This article was written by Damian Chmiel at www.financemagnates.com.