The ‘Dear CEO’ letters issued by the Financial Conduct Authority (FCA) are often sent to firms in specific sectors, highlighting the regulator’s concerns over specific issues in that sector. However, on January 9, the letter that the FCA placed on its website is actually intended to be read by the CEO or equivalent of every authorised firm. This latest Dear CEO letter explains the FCA’s concerns over financial promotions issued by firms which incorrectly suggest that all of the activities which they undertake are regulated by the FCA, when this may not be the case.
Firms for whom 100% of their business activities are FCA-regulated need not worry too much about the content of the letter. However, CEOs of firms that carry out a mixture of FCA-regulated and non-FCA-regulated business need to urgently review their promotional material and make sure that these promotions do not in any way imply that all of their business activities are regulated by the FCA. Most financial promotions from authorised firms state that the firm is ‘authorised and regulated by the Financial Conduct Authority’, or similar, but an additional clear and unambiguous statement on the promotion of which activities are not regulated should be enough to make things clear.
The letter reads:
“Some of the firms that we regulate undertake both regulated and unregulated business. We have recently become aware of firms issuing financial promotions which suggest or imply that all of the activities which they undertake are regulated by us and/or the PRA when, in fact, they are not. These financial promotions are unlikely to provide consumers with the clarity that our rules require and could leave consumers unable to understand whether the products or services which are promoted are regulated by us and/or the PRA. We make clear in our Handbook that if a firm names the FCA and/or the PRA as its regulator in a financial promotion that refers to aspects of its business (e.g., products or services) which are not regulated by the FCA and/or the PRA, then the promotion should make clear those aspects which are not regulated.”
Jonathan Davidson, Executive Director of Supervision – Retail and Authorisations at the FCA, said:
“It is completely unacceptable for firms, which are regulated for some of their business, to market unregulated investments by implying to customers that all their business is regulated. We are committed to stamping out this misleading practice and recommend that customers should ask firms whether what they are buying is really regulated by the FCA.”
The FCA monitors firms’ financial promotions as part of its ongoing supervision activities and can take enforcement action where its financial promotions rules are breached. This includes the power to ban promotions from being used.
Firms are also reminded that communications via websites and social media are likely to fall under the FCA’s definition of a financial promotion.
Examples of unregulated activities that may be carried out by authorised firms include:
Consumer buy-to-let mortgages
Some forms of specialist or niche investment
The sale of certain products for which credit agreements are offered
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article