Financial promotions quarterly data 2023 Q4

0 s137S (the Banning Power) directing a firm to withdraw financial promotions

1 Own Initiative Action for Imposition of Requirements (OIREQ) was approved, restricting the firm’s ability to communicate or approve financial promotions

1 Voluntary Application for Imposition of Requirements (VREQ) was accepted, restricting the firm’s ability to communicate or approve financial promotions

0 Undertaking and Attestation

1,004 promotions were amended or withdrawn following our intervention with 72 authorised firms

A firm advised us that it proposed to start approving financial promotions (s21 approvals) for cryptoassets. But on the same day as notifying us we became aware that the firm had already approved several financial promotions for an unregistered crypto asset entity.

We reviewed the firm's systems and controls and the competency and experience of staff and found they were not adequate. In addition, we identified several breaches with the approvals they had already undertaken. We invited the firm to apply for a VREQ which prevents them from providing s21 approval for cryptoassets and requires them to withdraw any approvals already given. The firm agreed to this course of action.

We intervened where a regulated firm was also acting as an ISA Manager. We were concerned that consumers were being presented materials about investment opportunities where there was significant risk that those materials were inaccurate and / or were potentially misleading. The firm was providing services to companies issuing investment products but did not conduct any due diligence regarding these investments. The firm was also unable to demonstrate it fully understood the products it was distributing and had not considered how they were suitable for its target market.  The firm had inadequate systems and controls and resources to ensure these investments were distributed appropriately and in the best interest of its clients.

Due to multiple rule breaches and the potential risk to consumers, we used our Own Initiative powers to stop the firm undertaking regulated activities for any new investments or new funds into existing investments.

The firm was operating shared social media profiles across its group companies and potentially a global website, so it was not clear which entity consumers were engaging with. In addition, there was a misleading comparison of average leverage with the firm’s competitors and the prominence of the warning explaining the percentage of consumers that lose money with this provider was not sufficient.

The firm have confirmed that the previously identified website was not intended for UK consumers. They implemented an auto redirect based on geo-location and IP address, which means UK consumers are automatically directed to the UK version of the website. In addition, they have created specific UK social media accounts, so that they can now be easily distinguished from the other global entities. The comparison of average leverage with competitors was removed and the prominence of its loss percentage warning was improved.

A consumer credit firm was potentially misleading consumers by promoting that it offered lower and fairer loan rates when this may not be the case. The firm was promoting taking out a loan to pay off a credit card without warning consumers of the potential risks of taking out additional credit to pay off existing debt. The firm also did not make clear the existence of credit checks, its representative Annual Percentage Rate (APR) lacked prominence on some promotions, and it was using misleading statements that could not be substantiated.

Following our intervention, the firm withdrew non-compliant promotions and amended several promotions across multiple media platforms.

Despite our extensive attempts to contact a large overseas unregistered cryptoasset exchange, it refused to engage with us before the financial promotion regime came into force. The firm continued to issue financial promotions to UK consumers, including through its website, social media and apps after the regime came into force in October 2023.

We issued a consumer warning against the firm. We have worked with tech companies to remove and block the firm’s illegal financial promotions, resulting in the removal of the firm’s apps from UK app stores. As a result of our alert, an FCA regulated firm decided to suspend the provision of ‘on-ramp’ payment services, which allow the conversion of fiat currency into cryptoassets, to the exchange. We are working with international partners, including regulators in other jurisdictions, on co-operation and assistance in taking further action against the exchange.

As part of our review into how new rules for high-risk investments had been implemented, we identified that a firm offering peer-to-peer investments had introduced an appropriateness assessment that was not compliant with our rules. The purpose of the appropriateness assessment is to objectively and fairly test whether an investment is appropriate for the customer. But the firm had weakened the effectiveness of the assessment by providing information relevant to the questions during the assessment process, informed customers of the questions they had incorrectly answered, included several binary questions, and re-used the same questions in subsequent assessments. This meant that some customers taken on may not have fully understood the risks of the products before investing.  

Following feedback to the firm it amended its appropriateness assessment to remove any guiding information, stopped informing customers which questions they answered incorrectly, reworked questions to include at least 3 plausible answers and introduced new questions for subsequent assessments.  

A firm offering qualifying cryptoassets included a ‘blog’ section on its website and had not identified that many of the articles in this section were financial promotions. As a result, these pages did not contain the required risk warnings. The website was also found to include promotions for products that were not available to UK based customers without prominent disclaimers, and the risk warning that the firm had implemented on the website was not suitably prominent.

Following our intervention, the firm amended the design of the risk warning to improve its prominence, removed access to pages of the products not available to UK based customers as well as introducing more prominent disclaimers where the products were referenced. The firm also blocked access to the 899 pages of the ‘blog’ section of its website and identified which articles were financial promotions and therefore required risk warnings.

Many cryptoasset firms run ‘affiliate’ programmes where commission is paid to individuals or businesses who refer clients to the firm. Firms must have appropriate controls and oversight to ensure that their affiliates are not breaching financial promotions legislation. We identified a firm with no clear control framework to ensure any promotions made by its affiliates were legal.

Following our feedback, the firm updated its Affiliate Terms and Conditions to prohibit affiliates from referring UK-based consumers and introduced measures to reject any UK-based consumers who do get referred to the platform. Additionally, the firm has placed geolocation restrictions on its promotional materials provided to affiliates to prevent them being visible to UK consumers.