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.

FCA Presents New Requirements for Ad Approvals

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.

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.

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.

To help people make informed decisions to #save, #invest and borrow with confidence, we're introducing new screening checks for firms that approve financial adverts. #FinancialPromotion #FinancialServices https://t.co/HzKfOkBHkq

— Financial Conduct Authority (@TheFCA) September 12, 2023

"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."

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.

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 at the end of 2022, and now the latest regulations are on the verge of being implemented.

A month ago, the FCA released data 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 The April to June 2023 data showed that the FCA's interventions led to 1,507 promotions being amended or withdrawn by regulated entities.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 clone Clone A clone refers to a fraudulent attempt by an entity or individual to use the details of an authorized firm in a bid to convince people that they work that firm.This refers to a relatively new tactic that has seen fraudsters using the name, ‘firm registration number’, and address of firms and individuals authorized by regulators to suggest they are genuine. Clones are seemingly primitive techniques, though newly adopted by scammers that have evolved in the information era. As regulators push for A clone refers to a fraudulent attempt by an entity or individual to use the details of an authorized firm in a bid to convince people that they work that firm.This refers to a relatively new tactic that has seen fraudsters using the name, ‘firm registration number’, and address of firms and individuals authorized by regulators to suggest they are genuine. Clones are seemingly primitive techniques, though newly adopted by scammers that have evolved in the information era. As regulators push for Read this Term scams.

During the previous year, the FCA blocked or forced changes to 1,400% more rogue financial ads than the year before.

FCA's Broader Strategy for Consumer Protection

This move is part of the FCA's three-year strategy to set higher standards across the financial services sector. The 'Consumer Duty' supports the strategy to enhance consumer protection by ensuring that people receive understandable communications.

“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.

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.

As part of its latest efforts, the FCA aims to regulate 'finfluencers' and illegal promotion on social media. The regulator is also alerting cryptocurrency firms 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.