To enhance consumer protection and ensure well-informed financial decision-making, the FCA (Financial Conduct Authority) is implementing stringent screening checks for firms responsible for approving financial advertisements.
Firms endorsing financial marketing on behalf of unregulated entities will now be required to demonstrate their competence and expertise in assessing advertisements. Those granting approval must possess a thorough understanding of the financial product to ensure that promotional content is accurate and provides a fair balance between risk and reward.
Previously, any FCA-authorized firm could approve promotions on behalf of unregulated entities, which led to problems such as endorsements for products not fully understood and the dissemination of unclear, unfair, or misleading advertisements.
Starting from February 7, 2024, firms must apply to the FCA between November 6, 2023, and February 6, 2024, to continue their approval of adverts under the new rules. Firms with pending applications can continue approvals until they receive a decision.
Additionally, firms responsible for approving financial promotions will be required to regularly report on their endorsements and highlight any problematic advertisements they disapprove of, enabling the FCA to take swift action against misleading advertisements.
As part of its three-year strategy, the FCA is committed to setting and testing higher standards in financial services to empower consumers with accurate and relevant information. This aligns with the Consumer Duty, aimed at strengthening consumer protection and ensuring that communications are comprehensible.
These reforms complement the FCA’s previous efforts to strengthen advertising rules for high-risk investments, revamp social media guidance for financial product promotion online, and remove misleading ads. By promoting higher-quality advertisements and an informed consumer base, these measures aim to support a robust market for investing and saving.
The Financial Services and Markets Act 2023 introduced provisions to establish a new gateway for authorized firms to approve financial promotions for unregistered entities. A consultation on this new gateway was initiated by the FCA in December 2022.
By FCCT Editorial Team
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