FCA Sends ‘Dear CEO’ Letter over Misleading Promotions

FCA found firms’ promotions give the impression that all their products are regulated by UK’s authorities, when they are not.

Britain’s financial regulator today published a letter to the CEOs or equivalent of all authorized firms, urging them to ensure their investors have all information necessary to properly assess the regulatory coverage attached to their products.

The Financial Conduct Authority’s statement reminds regulated firms about their obligations when communicating with clients, and strongly encouraging them to review their websites and financial promotions.

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The problem for the FCA is that, in many cases, it found firms’ promotions give the impression that all their products are regulated by UK’s authorities when they are not. In other words, certain unregulated services were sold to investors inappropriately by assuming that FCA or other regulators are supervising such activities, leaving them at risk of serious losses.

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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‘It is completely unacceptable for firms, which are regulated for some of their business, to market unregulated investments by implying to customers that all their business is regulated.  We are committed to stamping out this misleading practice and recommend that customers should ask firms whether what they are buying is really regulated by the FCA,’ said Jonathan Davidson, FCA’s executive director of supervision.

The letter further states the regulator is very concerned about the poor standards it has seen, and that some firms may be subject to investigation by the Enforcement Division as a result.

Firms must balance their need to communicate a clear business message with the FCA’s relevant requirements. Their CEOs will also need to consider whether the financial promotions they approve are fair and clear, and don’t constitute misleading information.

“While we do not approve advertising and it is up to firms to ensure that financial promotions are compliant with our rules, we do monitor adverts across different media in the UK,” said the letter.

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