The Financial Conduct Authority (“FCA”) has published its financial promotions data that provides insight into the action taken against authorised firms breaching financial promotion rules and investigations into unregulated activity between 1 January 2023 to 31 December 2023.
During 2023, over 10,000 financial adverts and promotions were withdrawn or changed following intervention from the FCA), an increase of 17%, from 2022.
The FCA also published 2,285 alerts to help prevent consumers from losing their money to scams, up from 1,800 the previous year.
The latest data demonstrates the first period of FCA supervision under the new Consumer Duty regime.
The Consumer Duty represents a significant shift in FCA expectations and aims to set higher standards of protection for financial services customers and ensure that firms put consumers at the heart of their business, produce products and services that are designed to meet customers’ needs, and provide fair value.
Over the past 2 years, the FCA have significantly increased intervention activity in response to poor financial promotions compliance in authorised firms and activity involving unauthorised firms and individuals. There was an 16.6% increase in amendments and withdrawals, as 10,008 promotions amended/withdrawn, compared to 8,582 in 2022. This is up from just 573 amendments/withdrawals of financial promotions in 2021.
The FCA also issued 2,285 warnings against unauthorised firms and individuals, an increase of 21% from 1,882 in 2022.
Section 21 Gateway
As of the 7th February 2024, authorised firms require permission from FCA to approve promotions for unregulated persons. This was introduced to ensure that firms approving financial promotions have the required competence and expertise as well as adequate systems, controls and processes to ensure that any promotions they are approving comply with FCA rules.
What does the FCA say about financial promotions?
Any firm regulated by the FCA is bound by its ‘Principles for Businesses’. Some of these Principles are directly relevant to financial promotions.
Principle 2 – A firm must conduct its business with due skill, care and diligence
Principle 3 – A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems
Principle 6 – A firm must pay due regard to the interests of its customers and treat them fairly.
Principle 7 – A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is fair, clear and not misleading
Principle 12 – A firm must act to deliver good outcomes for retail customers.
The FCA set out clear guidance that must be followed for how firms communicate with consumers. Marketing and information which is an invitation or inducement to engage in regulated activity that is communicated in the course of business should;
- pay regard to its target market, including its likely level of financial capability;
- have in place systems and controls to manage effectively the risks and ensuring good consumer outcomes
- include the firm’s full name and either address or contact point from which the address is available
- ensure it is clear, fair and not misleading
- not omit any matters that cause the promotion to be unclear, unfair or misleading
- not make false indications regarding the firm’s resources, independence, scale of activities or to the scarcity of service
- make no references to approvals by the FCA or any government body (unless such an approval has been obtained in writing)
- take account of what information the customer needs to understand the product or service, its purpose and the risks, and communicate information in a way that is fair, clear and not misleading.
These requirements cover promotions such as:
- Web content
- Email marketing
- Social media
- Print, online, television and radio adverts
- Marketing brochures and literature
- Direct mail
- Sales aids, such as presentations
Why is financial promotion compliance important?
The FCA can use investigative and enforcement powers to ban non-compliant promotions, levy fines and even pursue criminal prosecution.
The FCA expect authorised firms issuing financial promotions to take responsibility in making sure all communications of financial promotions are clear, fair and not misleading. This also includes firms that are approving financial promotions and marketing across all media platforms such as websites, paid for Google ads and social media sites.
