What does this mean for regulated firms?

On 3rd of February 2023, the Financial Conduct Authority posted data on 2022 financial promotions, which shows a significant increase in FCA intervention activity. This follows the Consultation Paper (CP22/27) which proposed measures to strengthen controls for firms who want to approve financial promotions. The FCA is committed to set higher standards across financial services and to protect consumers.

The proposed changes introduced to Parliament by HM Treasury seek to require regulated firms to go through new screening checks before they are allowed to review and approve financial promotions, giving the FCA far greater oversight and the ability to clamp down on illegal, misleading or unfair financial marketing. The FCA is expected to publish a Policy Statement with the final rules in the first half of 2023.

Why is this happening?

In the FCA’s consultation document, it said that it had seen clear evidence of consumers investing in high-risk products, that are simply not in line with their individual risk tolerance, due to poor quality approved financial promotions.

It claimed that in the worst cases, the performance of investments was drastically different from the claims made in promotions or the product had failed, therefore leading to significant and unexpected losses for retail investors. The data released by FCA on 2022 financial promotions showed substantial increased intervention activity further substantiating this claim and the need for greater compliance.

Under the new rules, firms will also be required to report back to the FCA regularly on financial promotions they have approved, which the regulator said will help to crackdown on rogue adverts and promotions.

Sarah Pritchard, Executive Director, Markets said:

‘Social media and online advertising means that consumers are taking less time between seeing a promotion and making a financial decision. It is therefore essential that they are equipped with the right information at the right time so that they can make good financial decisions. This is especially important as we face the rising cost of living.

‘These proposals will ensure those approving ads have the appropriate expertise and are held accountable for the promotions they sign off.’

Which Firms will need to consider the new standard?

When final rules are published, the financial promotions gateway will be relevant to UK firms that approve the promotions and marketing materials of others in the market. Overseas firms who wish to promote financial products or services to UK retail clients will also be affected. Unless a financial promotion made by an overseas firm is exempt, under the new proposed rules, it must be made through or approved by a UK, FCA regulated firm.

How ComplyPortal can help?

ComplyPortal is leading RegTech Software, which is designed by compliance professionals to help regulated firms simplify and digitise their regulatory compliance management in an easy to use cloud based platform, including the management and approval of Financial promotions in ComplyPortal’s approval module.

With the FCA’s proposal for stronger rules, it is imperative for all firms effected to create a robust and transparent process for the filing and approval of Financial Promotions. ComplyPortal helps many regulated firms to:

  • Configure and automate detailed workflows for the requesting and approval of Financial Promotions
  • Create a robust audit trail for any Financial Promotion requested by your firm
  • Provide full and detailed reporting of all Financial Promotions requested, approved or rejected by your firm
  • Show total transparency to the regulators that you as a firm are remaining compliant regarding the filing and approval of Financial Promotions
  • Simplify your firm’s workflow and reduce the risk of human error

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About ComplyPortal:

First developed in 2011 by compliance professionals for compliance officers, ComplyPortal offers workflow, and several modules to help firms with control and regulatory compliance monitoring.

ComplyPortal simplifies financial services regulatory compliance management on an easy-to-use cloud-based comprehensive compliance platform. It enables compliance officers, risk officers and senior management to keep track of their firm’s regulatory responsibilities and workflows. Book a demo today.