FCA to strengthen financial promotion rules for high-risk investments

On 19 January 2022, the FCA published consultation paper CP22/2 in which it proposes various changes to strengthen financial promotion rules for high-risk investments, including cyptoassets.

The proposals target authorised firms which approve and communicate financial promotions and aim to increase consumer protection. The consultation paper builds on questions asked in Discussion Paper DP21/1. See here for our summary of DP21/1.

What is proposed in the consultation paper?

The consultation paper proposes amendments to:

• the FCA’s classification of high-risk investments;
• the consumer journey into high-risk investments;
• strengthen the role of firms approving and communicating financial promotions; and
• apply the FCA's financial promotion rules to qualifying cryptoassets.

Who will these changes interest?

The proposals would affect the following:

• authorised firms which approve financial promotions for unauthorised persons (section 21 approvers), whether for high-risk investments or otherwise;
• authorised firms which communicate financial promotions relating to investment business;
• issuers of non-mainstream pooled investments, speculative illiquid securities and non-readily realisable securities;
• investment-based crowdfunding platforms and other intermediaries distributing investments to consumers;
• firms operating in the cryptoasset market;
• trade bodies for the investment-based crowdfunding, peer to peer and crypto-asset sectors;
• financial advisers;
• asset managers with experience of managing illiquid, long-term assets; and
• potential investors in long-term asset funds.

What happens next?

The FCA aims to publish a Policy Statement and final Handbook rules in summer 2022.

It will give firms three months from publishing final rules to comply with the new requirements.

For requirements relating to cryptoasset promotions, the FCA proposes that any changes would apply from the date on which qualifying cryptoassets are brought within the financial promotion regime.