World Crypto Global
- Written by: Matti Williamson
- Tue, 02 Aug 2022
- Israel
<p>The Financial Conduct Authority (FCA) is introducing <a href="https://www.fca.org.uk/news/press-releases/fca-clamps-down-marketing-high-risk-investments-consumers" target="_blank" rel="nofollow">new guidelines</a> for promoting high-risk investments. While crypt is classified as high-risk, the new rules will not apply to the promotion of crypto assets.</p><p>The FCA is waiting for the UK government's decision on how to legislate <a href="https://www.financemagnates.com/terms/c/cryptocurrencies/" target="_blank" id="b091101e-6e02-4b36-aa0e-7c972dfdd6ed_1" class="terms__main-term">cryptocurrencies</a> but highlights similar rules will apply to crypto-related products. The new UK PM will only be announced on 5 September 2022.</p><p>Companies will be required to clarify the risks in investing in an instrument and cannot offer incentives such as referring a friend, which is banned under the new rules. 4,226 ads were amended or withdrawn following the FCA's intervention.</p><p>Sarah Pritchard, the Executive Director, said: "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.</p><p>"Our new simplified risk warnings are designed to help consumers better understand the risks, albeit firms have a significant role to play too. Where we see products being marketed that don’t contain the right risk warnings or are unclear, unfair or misleading, we will act. </p><p>"This is even more important now because increases in the cost of living could prompt people to chase higher investment returns which may prove risky."</p><p>The FCA is asking for feedback on its new rules by 10th October 2022. The final rules will be introduced at the beginning of 2023.</p><p>Enhancing the Client's Journey</p><p>The FCA is anticipating that 300 firms will be affected by its new rules in the crypto space, which will in turn affect over 2 million consumers/security holders.</p><p style="" class="text-align-center">source: <a href="https://www.fca.org.uk/publication/consultation/cp22-2.pdf" target="_blank" rel="nofollow">FCA</a></p><p style="" class="text-align-left">The FCA wishes to enhance the risk warnings. Inducements to invest (such as refer-a-friend), to be banned, and personalized risk warning pop-ups for new investors with the company must be displayed.</p><p style="" class="text-align-left">Companies will be required to regularly check the <a href="https://www.financemagnates.com/terms/c/compliance/" target="_blank" id="569f58ee-534c-44f0-a7cd-f55b0f9a2b2a_1" class="terms__secondary-term">compliance</a> of approved promotions, ensuring they are in line with the FCA. Evidence declarations will also be required.</p><p style="" class="text-align-center">source: <a href="https://www.fca.org.uk/publication/consultation/cp22-2.pdf" target="_blank" rel="nofollow">FCA</a></p><p style="" class="text-align-left">Below is an example of how the new rules are implemented. The 24hr cooling period is to prevent any irrational decisions that are often emotionally driven.</p><p style="" class="text-align-left">If a retail investor is lured by high returns due to his financial conditions, the cooling period may improve the decision-making process from the consumer's angle.</p><p style="" class="text-align-center">source: <a href="https://www.fca.org.uk/publication/consultation/cp22-2.pdf" target="_blank" rel="nofollow">FCA</a></p><p style="" class="text-align-left">Furthermore, the UK regulator will ban mass marketing to retail investors for Non-Mass Market Investments (NMMI). Mini-bonds or pooled investments in a fund that has not been authorized by the FCA are considered as NMMI.</p><p>All of the new rules are available on the FCA's <a href="https://www.fca.org.uk/news/press-releases/fca-clamps-down-marketing-high-risk-investments-consumers" target="_blank" rel="nofollow">website</a>.</p> This article was written by Matti Williamson at www.financemagnates.com.
