This page analyses the latest data, from 1 January 2023 and 31 March 2023, from Financial Conduct Authority (FCA) action taken against authorised firms breaching financial promotion rules and referrals and investigations into unregulated activity.
This data provides an overview of how the FCA is working to improve standards across the market so that consumers are provided with clear and fair financial promotions which are not misleading.
What’s included in the data
- Key messages
- Authorised firms
- number of financial promotions reviewed during this period
- number of closed cases where promotions have been amended and withdrawn, including split across sectors, excluding cases which are still ongoing
- Unauthorised firms
- number of unauthorised reports received, and alerts issued
- Examples of work on financial promotions during 2023 Q1:
- reducing and preventing serious harm
- setting and testing higher standards
- promoting competition and positive change
- Information on how to report a misleading financial advert or potential scam
- FCA interventions in 2023 Q1 resulted in 2235 promotions being amended/withdrawn by authorised firms.
- Issued 611 alerts on unauthorised firms and individuals, with 12% of these about clone scams.
- Given the rising cost of living we did some work focussed on unauthorised and authorised firms who offered debt advice which resulted in 9 alerts being issued, and the FCA imposed voluntary requirements (VREQs) on 2 firms.
- Action against a firm using a trading name which could potentially mislead consumers that the firm was a not-for-profit organisation or part of a government scheme. Firms should not use misleading trading names.
- FCA reviewed the marketing and promotion of Speculative Illiquid Securities (SIS), including mini-bonds where they found that some investments are being ‘rolled over’. Some investors were also being wrongly categorised as high net worth or sophisticated.
Number of promotions reviewed
In 2023 Q1 we reviewed 539 financial promotions from multiple sources.
- 41% from our proactive monitoring
- 23% from consumers
- 19% from different areas of the FCA
- 10% from UK Regulators
- 7% from firms
Following intervention, in Q1 the FCA had 2235 promotions amended/withdrawn.
Table 1: Number of cases with interventions and amend/withdraw outcomes
- 0 s137S (the Banning Power) directing a firm to withdraw financial promotions
- 0 Own Initiative for Imposition of Requirements (OIREQs) were approved, restricting the firms’ ability to communicate or approve financial promotions
- 10 Voluntary Applications for Imposition of Requirements (VREQs) were approved, restricting the firms’ ability to communicate or approve financial promotions
- 0 Undertaking and Attestation
- 2235 promotions were amended or withdrawn following our intervention with 47 authorised firms
Graph below shows the split across sectors.
Figures rounded to the nearest percentage.
Retail investments and retail lending are the sectors with the highest amend/withdraw outcomes, totalling 90% of our interventions with authorised firms.
Some of the most common breaches involved credit brokers, lenders and firms promoting high-risk investments.
Number of reports received
In 2023 Q1, the FCA received 6989 reports about potential unauthorised business.
FCA issued 611 alerts about unauthorised firms and individuals, an increase of 15% from 531 in Q4 2022. 12% of these related to clone scams, which is where fraudsters use details such as the name and address of authorised firms and individuals, and a ‘firm registration number’ (FRN) to suggest they are genuine. Many of these involved breaches of the financial promotion restriction online. In almost all cases they asked for the websites to be taken down.
Examples of our interventions – authorised and unauthorised firms
Reducing and preventing serious harm
Mis-using consumers funds
A firm was referred to the FCA by the Financial Ombudsman Service due to an outstanding award of £70,000, where a consumer was told their funds had been invested in a bond. The concerns whether the firm could be effectively supervised and held appropriate resources. FCA imposed restrictions on the firm because they found no evidence that the money transferred by the consumer was invested in a bond or any other form of investment. Some of the funds were also transferred into a personal account of the Director.
Actions included freezing the firm’s bank account and its permissions to carry out regulated activities were cancelled.
Halo effect – cracking down on firms implying unregulated activities are authorised
Identified that a credit broking firm had an excessive number of trading names. Websites linked to the trading names promoted FX and Crypto trading platforms and listed the parent firms regulated status, despite it only having limited credit broker permissions. FCA found that no regulated activity had been undertaken in the previous 12 months and they were unable to engage with the Senior Management Function (SMF) directly.
FCA had all trading names removed from the Financial Services Register and all reference to the parent firm has been removed from the trading name websites. The firm is now being processed using our ‘use it or lose it’ initiative.
Debt packager firm uses misleading trading name
A debt packager firm was using a trading name which could potentially mislead consumers that it was a not-for-profit organisation or part of a government scheme. Consumers are unlikely to realise they were directed to a fee-paying service rather than free debt advice. Firms should not use trading names which mislead on the nature of the services they offer. Following FCA intervention, the firm agreed to remove the trading name and all associated promotional material.
FCA will continue to focus on monitoring firms’ use of trading names and act where we identify misuse. Firms should review October 2022’s Regulation Round-Up and the FCA website on how they may be used appropriately.
Firms taking advantage of the rising costs of living
Due to the rising cost of living, the FCA has been focusing on firms that appear to be providing unauthorised debt advice to consumers. Where they have identified a breach of our regulatory perimeter, they have engaged with 19 unauthorised firms and have issued 9 alerts. FCA work remains ongoing, and will continue to work to prevent harm to consumers in this area.
A debt firm whose target market are likely to display vulnerable characteristics, was misleading consumers by suggesting they could become debt free without incurring any costs. The firm provides free debt advice, but the different debt solutions on offer are not free. The FCA also found that the firm was:
- using their regulated status in a promotional manner
- not signposting to MoneyHelper in a prominent or complete way
- using Google Ad promotions for debt solutions in an unsuitable way due to restricted space for key messages
Following FCA engagement, given the scale and severity of the breaches, the firm applied for the imposition of a voluntary requirements (VREQ) which was agreed to.
The firm withdrew their financial promotions and did a review of their systems and controls for their marketing of financial promotion.
Review of the marketing and promotion of Speculative Illiquid Securities including mini-bonds
FCA reviewed a sample of firms that have previously been involved in the distribution of Speculative Illiquid Securities (SIS) including mini-bonds, to find out what exposure, if any, these firms still have and the amount that remains outstanding. The review identified examples of SIS, not being fully repaid at maturity. Instead, those investments were: ‘rolled over’ by either:
- being placed into a new SIS, or other form of debt security
- converted into equity
- the maturity date extended.
The FCA is concerned that these events could cause consumer harm as the investor cannot access their money as originally expected. If rollovers are considered necessary, they expect firms to communicate with investors in advance, about the impact this will have on them. Given the potential for consumer harm, they also expect the firm to promptly submit a SUP 15 notification.
They also saw examples of investors being incorrectly categorised as high net worth or sophisticated. All firms involved in the distribution or issuing of SIS must ensure they have robust processes in place to categorise investors correctly. These responsibilities remain with the firm even if it outsources client categorisation processes to a third party (e.g., when using a ‘white-labelled’ platform).
An insurance firm used an inappropriate image in its marketing campaign for life insurance. FCA viewed this promotional content as breaching a number of principles, including ‘integrity’ and ‘management and control’. The firm immediately received many complaints about the promotion and removed it
FCA intervention centred on the systems and controls and questionable taste and decency, and the firm agreed to cease to communicate any further financial promotions that had not received prior approval from the product manufacturer (or co-manufacturer) or another authorised person, under section 21 of FSMA.
Peer-to- Peer firm multimedia failures
FCA found a peer-to-peer firm, who were providing high-cost short term credit and investment opportunities, in breach of several financial promotion rules across its Google Ads, Facebook sponsored Ads and on its website. The promotions were missing important risk warnings, the representative annual percentage rate (“RAPR”), it implied immediacy of funds and used potentially misleading language, headlines and illustrations.
Given the number of breaches, the firm applied for the imposition of a VREQ which the FCA agreed to, and withdrew all non-compliant financial promotions. The firm also undertook a review of its systems and controls, policies and procedures in relation to financial promotion activity. The firm also signed an attestation, formally taking accountability for carrying out the actions required.
Setting and testing higher standards
Consumer Duty Expectations
The FCA published 17 sector/portfolio letters to over 45,000 firms in scope of the Consumer Duty. The letters describe expectations and aim to help firms implement and embed the Duty effectively.
Strengthening financial promotions rules
As highlighted in the annual publication the FCA were extremely concerned with firms’ poor compliance with the new financial promotions rules for high-risk investments. Even after they notified firms that their websites were in breach of the rules, it took over two weeks for firms to update their websites to be compliant. This is far below the standard expect from firms. The second half of the rules came into force on 1 February 2023. The FCA has now started to investigate whether firms have updated their processes to meet these rules and take action against any failings.
Promoting competition and positive change
Cryptoasset firms marketing to UK customers
In January 2022 the FCA consulted on proposed rules for cryptoasset promotions. They will publish final rules for cryptoasset promotions once the relevant legislation has been made. The FCA expect to take a consistent approach to that taken for other high-risk investments, subject to any specific nuances in relation to cryptoassets. Cryptoasset businesses marketing to UK consumers, including firms based overseas, must get ready now for this regime. Firms may potentially face criminal sanctions if they do not comply with this regime.
Cracking down on misleading credit brokers
Following on from earlier work on credit brokers the FCA published a case study which highlighted some of the misleading phrases they see from lenders who offer high-cost short-term credit. This aims to let consumers know what to look out for when looking to borrow money and therefore prevent potential consumer harm.
How to report a misleading financial advert or potential scam
Report a financial advert or promotion that you think is misleading, unfair or unclear.
Report a scam, authorised firm or individual to the FCA.
FCA casework with will usually involve confidential information for the purposes of section 348 of the FSMA. The FCA is therefore unlikely to be able to provide further information about particular cases. Find out more about the information they can share.
Note: The figures reported within this data are accurate at the time of publication. However, they can be subject to change depending on any ongoing work with a Firm.
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