FCA Trends in Financial Promotions: A Warning for Consumers and Firms
The Financial Conduct Authority (‘FCA’) published their latest report on financial promotions data in 2023. The report evidences that the FCA were responsible for preventing thousands of misleading ads or promotions for financial products.
Use of Social Media to Promote Financial Products
The FCA have noted a substantial increase in the number of bloggers and influencers on multiple social media platforms that are promoting financial products to their younger audiences. This is not only harmful to people who are enticed by the adverts, but it is in most cases, unlawful promotion.
The FCA monitors these ads and works closely with social media giants to remove harmful content, in an attempt to keep social media safe for users.
In April 2023, the FCA provided information to influencers on the legal obligations they are subject to when they choose to promote financial products or services. This guidance was introduced in an attempt to stop the influx of damaging promotions and to highlight the risk it can cause to both the influencers themselves and the general public. Promoting unlawful financial services can be a criminal offence under the Financial Services and Markets Act 2000 (Section 21) and may result in “a maximum of two years imprisonment and an unlimited fine”.
Whilst the FCA and major social media companies continuously work to remove any harmful promotions, as a consumer you should be wary of these types of adverts. It is important to be wary of what you see on social media, as this is not a regulated platform and the protections are limited. So, take what you see in your scroll time with a pinch of salt, and stop to think before making any rash decisions based on financial products being promoted by social media influencers.
Cryptoasset Financial Promotions
Since October 2023, the FCA have introduced the promotion of cryptoassets within their remit. This means that they can review and take action against firms to protect consumers.
Since implementation, they have reviewed 44 crypto firms registered with the FCA. If firms were found to be non-compliant, they were asked to remedy this and conduct a full review of their promotions The FCA have also prosecuted firms illegally promoting to UK consumers. As such the FCA have issued, so far, 450 consumer alerts against firms illegally promoting cryptoassets and continue to work with tech companies to be able to remove and block these illegal promotions.
Common themes identified with unlawful promotion of cryptoassets, include:
- Use of influencers to promote firms;
- Using generic risk summaries;
- No visible risk warnings;
- Using regulated status in a promotional way;
- Lack of evidence to support claims of ‘safety’ and ‘security’ with use of cryptoassets services.
These themes highlight the importance of being proactive when possibly faced with an unlawful promotion. With the dominance social media has, consumers need to be cautious of these advertisements and do their own research or contact legal professionals to assist them before making any commitments.
For firms promoting cryptoassets and wishing to operate lawfully in the UK, this report emphasises the importance of ensuring they are FCA registered and adhering to the FCA’s rules on financial promotions of cryptoassets. Failure by firms to do so risks prosecution or an FCA investigation.
How Can Ellis Jones Help?
Ellis Jones has substantial experience in both regulatory law and banking and finance litigation in order to deliver robust and clear legal advice tailored to your individual circumstances. For consumers, we are able to substantively assess your circumstances and guide you through the various processes to seek compensation for any loss caused by unlawful promotion of financial products or services.
FCA regulated entities seeking to promote financial products or cryptoassets may wish to take legal advice to ensure full compliance. If you are a firm who has been contacted by the FCA or is subject to an FCA investigation, Ellis Jones can assist and advise you through this process.
If you wish to discuss a potential instruction, please contact James Constable, Senior Associate in the Regulatory department on 020 3830 8422 or by email to James.Constable@ellisjones.co.uk or Daniel Lewis, Solicitor in the Banking and Finance Litigation Department, on 020 3978 4724 or by email to Daniel.Lewis@ellisjones.co.uk to discuss.
About the authors
James is a Senior Associate Solicitor in our Crime and Regulatory departments and is based in our London office. James was ranked Band 1 in Chambers UK 2024 for crime. He is described as “a calming influence, is clear about what needs to be done in stressful situations.”
Dan is a Solicitor in our Banking & Finance Litigation department and is based in our London office. Dan has experience in cryptocurrency and crypto-assets and is a member of the Crypto Fraud and Asset Recovery group and Tech Advocates London.
Lauren is a Paralegal in our Banking & Finance Litigation department and is based in our London office. Lauren’s primary role is to assist the team with a variety of matters which includes preparing legal documents, drafting letters, conducting legal research, and liaising with clients to discuss their matters.
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