FCA Turns Eye to Research Providers, Flags AD Baxton Brokers

The FCA interprets financial promotions as invitations or inducements by firms to customers to engage in investment activity.

The UK financial watchdog today warned against a provider of research services in the financial markets without proper authorization. The FCA also took the opportunity to remind firms of its various powers to act if a financial service or related activities did not conform with the regulator’s rules.

The latest regulatory flurry includes AD Baxton Brokers which appears to be soliciting UK residents for its advisory services without having obtained FCA ‎registration.‎ The company, however, admits that it operates essentially as a market introducer and analyst. “We are not regulated by the FCA nor do we offer investment tax or pension advice,” it adds on its website.

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Earlier in January, the Financial Conduct Authority highlighted its concerns over financial promotions that falsely implied that all of a firm’s activities were regulated by the FCA or other regulators, when in fact they were not.

The FCA interprets financial promotions as invitations or inducements by firms to customers to engage in investment activity. These promotions can include all forms of communication by firms, including through advertising, websites and social media.

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As such, AD Baxton Brokers and similar providers fall short in their responsibilities, and thus they could be in trouble with the FCA.

Also under European legislation known as MiFID II, asset managers will have to pay financial institutions directly for research instead of combining the cost with trading commissions.

The debate has initially focused on price negotiations for research with some providers offering packages that include written reports and direct access to analysts. But some brokers have been caught off guard after the City watchdog said that content produced by their in-house analysts would also count as research.

This discovery has previously led to a ban on the way that certain investments are promoted. Specifically, the City watchdog has banned firms from using their FCA authorization status in a promotional way, including the use of its logo without permission.

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