Financial promotions quarterly data 2023 Q2


INSIGHT
Published
Aug 4th '23
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This page analyses the latest data, from 1 April 2023 and 30 June 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    • number of closed cases where promotions have been amended and withdrawn, including split across sectors, excluding cases which are still ongoing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 our work on financial promotions during 2023 Q2:
    • 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

 

Key messages

 

  • Interventions in 2023 Q2 resulted in 1,507 promotions being amended or withdrawn by authorised firms.
  • FCA issued 400 alerts on unauthorised firms and individuals, 11% of these were clone scams.
  • On 31 July 2023, Consumer Duty came into force for new and existing products and services that are open for sale or renewal. The Duty is a significant shift in FCA expectations, setting higher standards of consumer protection, which will enable them to continue to raise industry standards.
  • On 6 April 2023, the FCA released an infographic in conjunction with the Advertising Standards Authority, to educate fin-fluencers about their obligations when seeking to promote financial services and products. 45,000 people viewed the posts and there were 1,300 engagements.
  • On 8 June the FCA published Policy Statement, PS23/6, setting out final position on the rules that will apply to firms promoting cryptoassets to UK consumers. All firms must be ready to comply when the rules come into force on 8 October 2023. The regulator will take swift, assertive action against any breaches they identify.
  • FCA proactively reviewed the marketing and promotions of funeral plan providers which resulted in us writing to 17 firms and 450 promotions being amended or withdrawn. Common themes included firm’s using their regulatory status in a promotional way, use of promotional language on safeguarding and not making it clear what is included and, more importantly, what’s not included within the funeral plan.

 

Authorised firms

 

Number of promotions reviewed

In 2023 Q2 we reviewed 301 financial promotions from multiple sources.

 

  • 39% from consumers
  • 20% from UK Regulators
  • 16% from different areas of the FCA
  • 15% from our proactive monitoring
  • 10% from firms

 

Following intervention, in Q2 FCA had 1,507 promotions amended/withdrawn.

 

Table 1: Number of cases with interventions and amend/withdraw outcomes

 

2023 Q2

 

  • 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
  • 8 Voluntary Applications for Imposition of Requirements (VREQs) were approved, restricting the firms’ ability to communicate or approve financial promotions
  • 0 Undertaking and Attestation
  • 1,507 promotions were amended or withdrawn following our intervention with 54 authorised firms

 

 

Graph below shows the split across sectors.

 

Image: FCA 2023

 

Figures rounded to the nearest percentage.

 

Retail investments and retail lending are the sectors with the highest amend/withdraw outcomes, totalling 70% of our interventions with authorised firms.

 

Some of the most common breaches involved debt advice firms and peer 2 peer lending platform firms.

 

Unauthorised firms

 

Number of reports received

 

In 2023 Q2, received 6,387 reports about potential unauthorised business.

 

FCA issued 400 alerts about unauthorised firms and individuals. 11% 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 we asked for the websites to be taken down.

 

Examples of our interventions – authorised and unauthorised firms 

 

Reducing and preventing serious harm 

 

Fin-fluencers

 

Issue

On  6 April 2023, FCA released an infographic in conjunction with the Advertising Standards Authority, to educate fin-fluencers (influencers that publicise content on financial matters) about their obligations when seeking to promote financial services and products. This infographic was released to provide guidance to potential fin-fluencers. Sharon Gaffka, a previous Love Island contestant with a social media following of approximately 526,000, promoted the infographic on her Instagram and TikTok accounts and spoke about her journey as an influencer and the value of the new guidance. 45,000 people viewed the posts and there were 1,300 engagements. It was picked up widely by the press. Unauthorised fin-fluencers should carefully consider any financial promotions issued through their social media platforms as illegal financial promotions can amount to a criminal offence.

 

Action taken

On 28 April 2023 FCA hosted a roundtable event at their Stratford office for agents of fin-fluencers and the Influencer Marketing Trade Body to share the infographic with parts of the industry that may be able to prevent consumer harm at source.

 

Limited permission credit broker marketing high-risk investments

 

Issue

FCA intervened where a firm with limited credit broking permissions was promoting high-risk investments to ordinary retail investors. They were concerned that the firm was not issuing any risk warnings to potential clients, not conducting any client categorisation or appropriateness tests. The financial promotion activity took the form of presentations, webinars and ‘training’ videos, some of which were recorded and then made available to the public. They also suspected the unauthorised individuals associated with the investment, were contravening section 19 of the Financial Services and Markets Act.

 

Action taken

The firm voluntarily agreed to withdraw all active financial promotions, communications and marketing materials and an asset restriction was put in place. FCA continue to investigate the investment opportunity promoted.

 

Debt advice firm implying government endorsement

 

Issue

A debt advice firm had the leading statement that ‘Government Legislation may allow you to write off your unaffordable debt’ on their website, which could potentially mislead consumers that the firm’s services had received government endorsement. The website also lacked balance, as it emphasised the benefits of different debt solutions but failed to include the downsides, and in addition to this the firm’s fee structure was unclear and the sign posting to MoneyHelper lacked prominence.

 

Action

Given the breaches and the potential vulnerability of consumers searching for debt advice, intervention led to the FCA inviting the firm to apply for the imposition of a voluntary requirements (VREQ).

 

The firm amended their website ensuring it was complying with the relevant Handbook rules.

 

E-Money Issuer with repeated non-compliance of the financial promotion rules

 

Issue

An e-money firm was found to be using their regulated status in a promotional way across multiple pages on its website, as well as unclear and potentially misleading information regarding its account features.

 

Action

Following engagement and given the firm had previous financial promotion breaches, the firm applied for the imposition of a voluntary requirement (VREQ) which the FCA agreed to.

 

The firm amended and withdrew its financial promotions that did not comply with the relevant Handbook rules and undertook a thorough review of its systems and controls

 

Retail Banking firm not making it clear re travel insurance offering

 

Issue

A retail banking firm was found to have unclear information about their family travel insurance offering on their website. The firm was not making it clear that the card holder would need to be part of the trip, for the insurance cover to be valid.

 

Action

Given the potential for harm, FCA intervened, requesting the firm amend their website and relevant policy documents and paperwork.

 

The firm made the necessary amendments and undertook remedial action by writing to c. 140,000 premium account customers, to ensure the cover requirements were clear and arranged refunds where appropriate

 

Mis-leading consumers re funeral cover

 

Issue

An adviser/intermediary firm was found to be potentially mis-leading consumers about their funeral plan cover. The firm did not make it clear that what was being offered was a life insurance product rather than a pre-paid funeral plan. The firm was also found to be using mis-leading language such as ‘guaranteed’ and ‘protected’ without providing sufficient balance around the limitations of what was being promoted.

 

Action

The firm paused the product and made the required amendments to ensure that their promotions met the fair, clear and not mis-leading requirements.

 

Wealth Management firm missing the required warnings

 

Issue

A wealth management firm failed to include the correct risk warning on their website and failed to include the past performance warning on their social media promotions. In addition to this, the firm was found to be missing the required tax warning on their website and social media posts.

 

Action

Following our intervention, the firm amended their financial promotions and reviewed their systems and controls, policies and procedures for their financial promotion activity.

 

Setting and testing higher standards

 

Cryptoasset firms marketing to UK customers – FCA Policy Statement published

On 8 June the FCA published Policy Statement, PS23/6, setting out their final position on the rules that will apply to firms communicating financial promotions for cryptoassets to UK consumers. These rules confirm that the FCA is categorising cryptoassets as ‘Restricted Mass Market Investments’. This means firms must, among other requirements, display clear risk warnings when promoting cryptoassets, ensure consumers have appropriate knowledge and experience to invest, implement a cooling off period before allowing first-time investment and ensure promotions are clear, fair and not misleading. Firms that are not registered under the Money Laundering Regulations, who do not meet a relevant exemption, will also no longer be permitted to communicate their own financial promotions to UK consumers. All firms must be ready to comply when the rules come into force on 8 October 2023. The regulator will take swift, assertive action against any breaches they identify.

 

Testing firms’ implementation of PS22/10 rules

As outlined in Q1 publication, the FCA is investigating how firms have implemented the new rules for high-risk investments including their approach to appropriateness tests and client categorisation. Engagement with firms is ongoing and they will provide further updates and share findings once they’ve completed the reviews.

 

Consumer Duty

On 31 July, Consumer Duty came into force for new and existing products and services that are open for sale or renewal. The Duty is a significant shift in our expectations; setting higher standards for financial services customers with a new Consumer Principle that requires firms to act and deliver good outcomes for retail customers. FCA rules require firms to consider the needs, characteristics, and objectives of their customers – including those with characteristics of vulnerability – and how they behave, at every stage of the customer journey. This will enable the regulator to continue raising industry standards.

 

Promoting competition and positive change

 

Recently the FCA has seen cases of firms seriously mismanaging trusts. Often in these cases trustees are investing consumers’ assets into high-risk illiquid investments which are unsuitable. In April, they published a warning on the website highlighting the potential risks associated with trusts and outlined guidance on steps consumers can take to protect themselves.

 

Debt Packager Referral Fee Ban: Policy Statement

On 2 June 2023, the FCA set out new rules banning debt packagers from receiving referral fees and firms subject to the new rules must take steps to ensure that they comply. This means that after 2 October 2023, where CONC 8.3.11R applies, existing debt packager firms must ensure they do not receive any commission, fee or any other financial consideration from a debt solution provider for any referral or related service conducted.

 

Firms who start, or restart, carrying out debt packager business from 2 June 2023 will be subject to the ban and will not benefit from the implementation period. The rules also apply with immediate effect to principals with respect to any appointed representatives carrying out debt packager activity who are appointed on or after 2 June 2023.

 

Proactive review of the marketing and promotions of funeral plan providers

The FCA started regulating the funeral plans market on 29 July 2022; to bring higher standards and boost consumer protection. An initial review last year identified some moderate concerns that have since been addressed. This year they’ve reviewed the remainder of the portfolio which resulted in us writing to 17 of the remaining 21 firms with concerns. Some common themes being firm’s using their regulatory status in a promotional way, use of promotional language on safeguarding and not making it clear what is included and, more importantly, what’s not included within the funeral plan. This proactive work resulted in over 450 promotions being amended or withdrawn.

 

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 Financial Services and Markets Act 2000. 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.

 

Source: FCA

 

Download: Financial Promotion Guide

 

LS Consultancy is ideally placed to support firms of all sizes and types with this Financial Promotions review.

 

Need some promotional advice? If you want to understand more about how to make sure your marketing materials meet FCA standards, please click here.

 

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