The UK Financial Conduct Authority (FCA) today announced its plans to address concerns about the ease and speed with which people can make high-risk investments by proposing a significant strengthening of its rules on how high-risk financial products are marketed.

Under the proposed rules, the FCA would ensure firms that approve and communicate financial marketing have relevant expertise and understanding of the investments being offered, improve risk warnings on ads and ban incentives to invest, for example new joiner or refer-a-friend bonuses. Those looking to make certain high-risk investments would also be asked more robust questions about their knowledge and investment experience, after research found many consumers were investing without being aware of the risks.

The FCA’s draft rules include proposed restrictions on the marketing of cryptoassets, in preparation for the Government bringing the promotion of these high-risk investments under the FCA’s remit. When it does, the FCA plans to categorise qualifying cryptoassets as ‘Restricted Mass Market Investments’, meaning consumers would only be able to respond to cryptoasset financial promotions if they are classed as restricted, high net worth or sophisticated investors.

Firms issuing such promotions would have to adhere to FCA rules, such as the requirement to be clear, fair and not misleading.

The FCA is inviting feedback on its proposals by 23 March 2022. It will consider all feedback before determining its final rules and, subject to the responses received, intends to confirm its final rules in summer 2022.

As FNG has reported, the UK Government announced earlier this week that it would strengthen the rules on cryptoasset advertisements and protect consumers from misleading claims.

Around 2.3 million people in the UK are now thought to own a cryptoasset with their popularity rising – but research suggests that understanding of what crypto actually is is declining, suggesting that some users may not fully understand what they are buying. This poses a risk that these products could be mis-sold.

The consultation response, published on Tuesday, January 18, 2022, sets out the government’s plan to bring the promotion of cryptoassets within the scope of financial promotions legislation. This means the promotion of qualifying cryptoassets will be subject to Financial Conduct Authority (FCA) rules in line with the same high standards that other financial promotions such as stocks, shares, and insurance products are held to.