Taking action against a fin-fluencer

A social media influencer had, on at least 2 occasions, promoted unauthorised traders to their followers. This individual was also the sole director of a regulated firm with permission for secondary credit broking. The social media promotions were made using the individual’s personal profile and made no reference to the regulated firm. The FCA engaged with the individual who agreed not to use their personal social media to promote financial services, and they imposed a requirement on the firm that neither the firm nor its director would promote any financial services offered by third parties.

Taking action when they see firms taking advantage of the rising costs of living

The FCA took action against a company seeking to take advantage of the rising cost of living to target potentially vulnerable consumers. The entity was providing trading signals to over 70,000 followers. They issued an alert and requested the online posts be removed.

Using the s137S banning power where they see the highest amount of harm

An online retail broker with over 1.1m UK retail customers with a primary target market of millennial investors was issued with a s137S financial promotions ban, requiring the firm to cease its marketing campaign. The FCA had serious concerns that the firm’s financial promotions, which involved social media influencers, were targeting vulnerable consumers with significant debt. They also invited the firm to apply for a voluntary imposition of requirements (VREQ) which meant it ceased all financial promotion activity until we were satisfied it had effective systems and controls in place at all points of the firm’s lines of defence.

Taking action against unauthorised business

In 2022, 25,861 reports were received about potential unauthorised business. Every report is assessed individually alongside any other reports may have received on that matter. Where the FCA identify sufficient and credible evidence of a breach of the rules, the matter is escalated to enable more detailed enquiries to be carried out. The most serious cases are referred to the Enforcement and Markets Oversight Department for investigation. Additionally, they capture relevant intelligence, issue alerts on the FCA website to warn consumers at the earliest opportunity about concerns and make referrals to specialist teams, law enforcement agencies and other regulators where appropriate to facilitate wider action.

The FCA took decisive action against an unregistered cryptocurrency exchange provider that appeared to be offering derivative cryptocurrency products to UK consumers. To protect consumers, they issued an alert and sought removal of the firm’s website.

The FCA contacted 55 consumers who had been identified on a scammer’s list targeting consumers who had been searching for loans online. They wrote to each consumer to warn them that they had been included on a scammer’s list and provided them with detailed guidance about how they can identify scams and how to protect themselves in the future.

Proactive action, monitoring new websites

During the year the FCA used various tools to assess around 180,000 websites which resulted in just over 4,500 websites and social media platforms being reviewed. This led to 1,441 alerts being issued and approximately 400 of the offending websites were taken down.

Cancelled firms promoting they are authorised

As part of the FCA proactive work, they reviewed 1,100 firms who had been cancelled and were therefore now unauthorised. They found 62 firms that were in breach of s19, s21 and/or s24 of FSMA who they contacted requesting that they amend their websites. On the back of this work, they have issued 4 alerts.

High-risk, non-standard investments and scams

Alongside the work on financial promotions, the FCA look specifically at high-risk, non-standard investments.  The work in this area focuses on firms that have significant adverse intelligence including known engagement in harmful behaviour and persons of interest and often results in intervention activity.  During 2022, the FCA agreed 13 variations of permissions or the imposition of a requirement with the firms (VREQs or VVOPs), imposed requirements under their own-initiative (OIREQS) on 3 firms and varied permissions of 4 firms under their own-initiative (OIVOPS) as part of this work.

Taking assertive action

The FCA imposed an OIREQ on a firm who were issuing and promoting speculative illiquid securities (SIS) to investors without carrying out a preliminary assessment of suitability. None of the promotional material included the specific risk warnings required when promoting a SIS and we believe that the SIS were sold to retail investors. Following the OIREQ, the firm went into administration because it was unable to make capital and interest payments on the bonds it issued.

Preventing harm against vulnerable consumers

FCA imposed an OIREQ on a high-cost lender, who had accepted loans with excessive interest rates to fund its business. It was subsequently unable to repay these loans. The FCA believe the firm misappropriated loan monies by enabling some to be paid to a connected person, then advised them the funds had been cascaded to the firm, when they had not. FCA requirements included an Asset Restriction and prevented the firm from accepting new funding.

New regulation

On 29 July 2022, the FCA started regulating pre-paid funeral plans. From this date all funeral plan providers need to follow new FCA rules, which include a ban on cold calling and commission paid to intermediaries, and high standards on governance and financial resilience. Since this date we have intervened with 3 firms who were breaching the rules, resulting in all of the firms’ websites being amended. The FCA also intervened where a firm was offering regulated pre-paid funeral plans as well as insurance without authorisation.

Strengthening financial promotions rules

In August 2022, the FCA published a Policy Statement, strengthening financial promotions rules for high-risk investments. The first half of these rules came into force on 1 December 2022, requiring all firms to display a prescribed risk warning when promoting high-risk investments. In December they reviewed 67 crowdfunding and peer-to-peer firms to assess whether they had complied with the requirements. Of those firms, 60% had failed to comply with the rules. The FCA were extremely concerned with this lack of compliance and took immediate action to ensure the firms remedied this. Due to the exceptionally low compliance rate, they will be looking at more firms and will closely monitor compliance against the second half of the rules which came into force on 1 February 2023. Firms must be ready to comply with the new rules. They will take action against any breaches, using assertive supervisory tools when they identify persistent breaches as well as potential use of enforcement action where necessary.

Raising market standards

The FCA issued a Dear CEO letter in May 2022 warning 28,000 lenders and brokers to stop using misleading terms in their advertising or face regulatory action. Since this date over 50% of interventions have seen firms entering into the imposition of a voluntary requirement (VREQ), who were breaching the rules. FCA intervention in this sector has resulted in 7,191 promotions being amended or withdrawn; which is one of the contributing factors to the significant increase in FCA amend and withdraw outcomes for 2022.

They also wrote a letter to the British Retail Consortium and issued a Dear CEO letter in August 2022 to 27,000 firms with lending permissions that could offer Buy Now, Pay Later (BNPL) products. Plans to bring BNPL credit agreements into full regulation are underway. However, BNPL financial promotions do not fall outside of the Financial Promotions Order and therefore must comply with the financial promotion rules. The FCA has engaged BNPL providers and its retailers on the content of its financial promotions and communications to ensure good standards and expectations are met. They are working closely with regulated firms who have confirmed section 21 approval for the financial promotions of unauthorised BNPL providers and their retailers, to ensure that regulated firms have appropriate systems and controls to effectively oversee compliance with the rules.

Online Harms

The FCA is engaged positively with the Government to ensure scams were covered by its proposed Online Safety Bill. They took a leading role in influencing online search engines and social media firms and, following public intervention, Google changed its policy to only permit FCA-authorised firms or promotions approved by FCA-authorised firms to advertise financial promotions with them.  They continue to influence social media firms to implement effective controls to stop scams, or otherwise illegal ads from appearing on their platforms. Following FCA engagement, Meta (Instagram and Facebook), TikTok, Twitter as well as Bing, have all changed their policies to permit only FCA-authorised firms to market financial services. Meta only introduced their policy at the end of October 2022 and the FCA continue to be in discussions with them about how this policy is implemented in practice to ensure that it is effective in blocking illegal advertising content consistently across all their platforms.

Mis-use of trading names

The FCA identified that some firms had been misusing trading names, registering trading names in the wrong circumstances and/or using them in a way which may mislead consumers. In order to promote better conduct in this area they updated the information on the appropriate use of trading names and highlighted this to firms in the October 2022 edition of Regulation Round-Up. They have since increased focus in this area and will continue to intervene with firms where they identify misuse of trading names.

The FCA will continue to report on their progress and findings in the quarterly financial promotions updates.