The UK Financial Conduct Authority (FCA) today published its response to key comments from the independent Financial Services Consumer panel annual report for 2019/20. One of the important topics in the FCA’s response concerns financial promotions.

At a firm specific level, where the FCA sees non-compliance with its rules it has asked firms to stop approving further financial promotions and taken down individual promotions that failed to comply. At a market-wide level, the regulator has stopped certain products from being marketed to ordinary retail investors at all, such as the recent ban of the financial promotions of ‘speculative mini-bonds’.

The FCA confirms that it is currently pursuing a number of enforcement investigations involving financial promotions. It can also investigate and prosecute unauthorised individuals and firms for unlawfully promoting investment schemes, where the communication of the financial promotions was not approved by an authorised firm. The regulator says it has a number of live investigations looking into the activities of unauthorised firms and their financial promotions.

Often, given the nature of the unlawful promotions and the fact that the individuals behind the statement may not be based in the UK, the FCA’s most immediate and effective course of action will be to issue an alert on the unauthorised firm and take steps to try to remove the website and/or social media. In 2020, the FCA published 1,185 alerts in comparison, in 2019 it published 586 alerts.

The FCA also mentioned its intervention to ban the mass-marketing of speculative illiquid securities. In December 2020, the regulator confirmed proposals to permanently ban the mass-marketing of speculative illiquid securities – including speculative mini-bonds – to retail investors. The new rules applied from January 1, 2021.

The ban applies to the most complex and opaque arrangements where the funds raised are used to lend to a third party, or to buy or acquire investments, or to buy or fund the construction of property. There are various exemptions including for listed bonds which are regularly traded, companies which raise funds for their own commercial or industrial activities, and products which fund a single UK income-generating property investment.

The watchdog stresses that it has been working with the Treasury in connection with their recent consultation on establishing a regulatory gateway which a firm must pass through before it is able to approve the financial promotions of unauthorised firms.

“If implemented this would mean that we would have to give consent to firms wishing to do this, and enable us to ensure only suitable firms with relevant expertise engage in this activity. It would also mean we could target our supervisory activity more effectively”, the FCA concludes.