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Financial Promotions to Investors

Atuksha Poonwassie, MD of Simple Crowdfunding, comments

In February, we tackled here the new Financial Promotion Order rules aimed at protecting regular retail investors from entering into higher risk investments without them grasping the full extent of their commitments. These rules took effect in January 2024.

However, a significant shift occurred during the Spring budget as these regulations were overturned. It appears that the government was swayed by ‘free-market’ and ‘red-tape’ arguments by those firms who believe that their investors (unlike those of regulated firms) are best served by (in my view), outdated and outmoded regulations. Not to mention a possible election and targeting votes.

The Financial Conduct Authority (FCA) released a statement on 6 March, addressing this policy reversal:

“These changes were taken forward after detailed consultation and recommendations made by the Treasury Select Committee in 2021 that the government should re-evaluate the appropriateness of the Financial Promotion Order exemptions……In our last perimeter report, we suggested the criteria for investors to be classified as ‘sophisticated’ should be tightened. This is to avoid the risk, which has occurred in many situations of investment fraud or misconduct, of ordinary investors self-classifying, often under pressure or through coaching, and buying risky investments that do not match their appetite or capacity for loss. “

Why does this review matter? It aligns with government policy aiming to regulate the marketing and sale of investment products, preventing harm to consumers and the market. Consequently, most investment and insurance products are subject to strict rules governing their distribution. 

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