FCA increases consumer protection for investment platforms

The British financial regulator FCA has released stricter rules on the marketing of high-risk investments to consumers. Peer-to-peer and equity crowdfunding platforms will need to give clear warnings and ban some investing incentives.

The British Financial Conduct Authority (FCA) released the news this week. Investment platforms will need to ensure investments fit the risk tolerance of consumers.

Clearer warnings and ban on ‘refer a friend’

The regulations are aimed at peer-to-peer and equity crowdfunding platforms. Under the new proposed rules, brokers need to provide clearer warnings and ban some investing incentives, such as ‘refer a friend’ bonuses. Additionally, platforms have to perform better checks so that potential customers know what they are getting into.

We want people to understand the risks involved.”

“We want people to be able to invest with confidence, understand the risks involved, and get the investments that are right for them which reflect their appetite for risk,” FCA’s Executive Director Markets Sarah Pritchard comments.

‘One-size-fits-all for different risk investments’

Branch organization Innovate Finance has responded critically. “Overall the rules continue to apply a one-size-fits-all approach to investments that have entirely different risk characteristics,” head of platform lending and investment Mike Carter told Altfi.

Firms have 4 months to introduce new risk warnings.

Firms will have four months to introduce new risk warnings and six months to comply with the remainder of the new rules, the FCA writes. Executive Director Pritchard: “Where we see products being marketed that don’t contain the right risk warnings or are unclear, unfair or misleading, we will act.”

Rules do not apply to crypto platforms yet

The new rules do not apply to promoting cryptocurrency assets. Although rules on crypto marketing are underway, the watchdog says. The FCA is just waiting for new digital asset rules to be confirmed by the government.

Rules on crypto marketing are ‘likely to follow the same approach as those for other high-risk investments’, according to the FCA.