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On 20 July the Treasury proposed a tweak to the rules surrounding promotion of minibonds and other high-risk unregulated investments sold to the public.

Currently, any firm which is authorised by the FCA, no matter what they are authorised for, can approve a financial promotion for an investment security, giving the investment the green light to be sold to the public.

It would not be fair to say that to be able to flog an unregulated investment security to the public, you need to cut out two tokens from a packet of breakfast cereal and send it to the FCA. What you need to do is hire someone else who at some point has sent in their tokens, and get them to approve your adverts.

Under the Treasury’s proposal, firms would need specific consent from the FCA to be able to sign-off financial promotions for unauthorised firms.

The Treasury’s consultation however leaves two glaring holes in the UK regulatory framework unaddressed:

  • unauthorised firms would still be free to run around Facebook, Google Ads and other advertising platforms running financial promotions, in the absence of any attempt by the FCA to clamp down on them
  • unregulated firms whose investments are advertised by the public would still be able to use “smaller company” exemptions to avoid filing full accounts and disclosing their financial position to any meaningful extent.

The Treasury seems to think the problem of billions of pounds of UK investor wealth being destroyed by inappropriate unregulated investments can be solved by taking the hoop that unregulated investment opportunities have to jump through in order to be able to enter this chaotic Wild West, and raising it slightly higher.

Without any meaningful attempt to stop such investments being marketed to unsophisticated investors, there is little evidence that this will have much of an effect.

Illustrating the scale of the problem, the Times revealed that, according to a Freedom of Information request, the FCA did not prosecute even one firm over misleading financial promotions between 2013 and 2019, fined only three groups and individuals, and did not remove a single firm’s permissions.

The FCA bleated that over 1,000 financial promotions had been amended or removed, but as promotions are often time-limited anyway, this is irrelevant unless action is taken to deter further misselling. It is equivalent to the Advertising Standards Authority’s famously pointless catchphrase “The advert may not appear again in its current form”.

The FCA’s failure to prosecute or shut down any firm between 2013 and 2019 suggests either

  • there wasn’t any problem with systemic and habitual misselling of investments between 2013 and 2019
  • the FCA doesn’t give a shit.

If anyone seriously believes the first, help is available, talk to your GP.

The FCA’s cultural belief that the misselling of high risk unregulated investments doesn’t matter causes it to act like a health and safety inspector which insists on ignoring the bloody severed limbs dangling out of every other machine. “Well you see, I’m a health and safety inspector, and those machines are clearly unsafe, so they’re not within my remit.”


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