FCA warns firms on promoting unregulated investments

Doc ReviewThis week, the Financial Conduct Authority published an open ‘Dear CEO’ letter, reminding regulated firms of their responsibilities relating to financial promotions.

What is the regulator’s concern?

It’s come to the attention of the FCA that some firms have been issuing financial promotions ‘which suggest or imply that all of the activities which they undertake are regulated by us and/or the PRA when they are not’.

The letter has been issued to remind firms’ boards and senior management of the FCA’s definition of ‘fair, clear and unambiguous financial promotions’. Firms breach FCA rules if they imply that their entire business is regulated, if parts of it are not.

Publishing the letter, the Authority’s Executive Director of Supervision – Retail and Authorisations, Jonathan Davidson, called the practice of marketing unregulated investments as being regulated as ‘completely unacceptable’ and a ‘misleading practice’.

What does the letter say?

The regulator reminds firms that:

It is unlawful for a person to communicate a financial promotion unless:

  • the person is an authorised person
  • the content of the communication is approved by an authorised person, or
  • a relevant exemption applies (section 21 of the Financial Services and Markets Act 2000 (FSMA)).

It also reiterates that ‘All financial promotions must be fair, clear and not misleading’. A key part of delivering this is ensuring that the intended audience material can ‘understand the extent of the relevant firm’s business that is regulated’.

The letter states that ‘Whilst we do not approve advertising and it is up to firms to ensure that financial promotions are compliant, we do monitor adverts across different media in the UK’, and reminds firms that the FCA has the power to ban a promotion or advert.

Stay in line with the FCA’s requirements

The letter may be a good prompt for firms to revisit their own financial promotions.

Could any of your promotions imply that your non-regulated activity is FRA- or PRA-regulated? More broadly, do they meet the regulator’s other requirements?

If you’re reviewing your marketing materials, it’s probably worth double-checking:

  • Do they comply with the guidance on fair treatment?
  • Do they meet guidelines on suitability – particularly important if you are communicating with vulnerable consumers
  • Do they include the right disclaimers and disclosures?
  • Have you given sufficient prominence to all essential information?
  • Do they follow the necessary approvals process, to ensure that all FPs are signed off by an authorised person?
  • Do you apply this best practice to all your promotions, including your website and social media?

A free guide to financial promotions compliance

To help firms meet their obligations around compliance for marketing materials, we have published the Compliance Guide to Financial Promotions.

It will help you ensure you are on the right track, by exploring: 

  • What constitutes a financial promotion?
  • Why are financial promotions so heavily regulated?
  • What is a ‘real time’ or ‘non-real time’ FP and how do they differ?
  • Is social media a viable medium for regulated firms?
  • Policy standards
  • Training and competency requirements
  • Management information
  • Record retention
  • Specialist areas

The guide is free, and you can download a copy here.

Nothing in this document should be treated as an authoritative statement of the law. Action should not be taken as a result of this document alone. We make no warranty and accept no responsibility for consequences arising from relying on this document.

New Call-to-action