Don’t trust your colleagues. That’s the message from the Financial Conduct Authority (FCA) when it comes to financial promotions, according to MirrorWeb.
The UK-based RegTech company has written a new blog reminding financial institutions that the FCA is really clear about whether or not they should trust unauthorised colleagues with financial promotions. The answer is that they shouldn’t.
“When approving a financial promotion of, and for communication by, an unauthorised person, it is unlikely to be appropriate to accept at face value information provided by the unauthorised person,” the FCA was quoted as writing in one of its guidance notes. “You should form your own view as to whether the promotion complies with our financial promotion rules.”
If financial institutions trust someone else, they run the risk of being non-compliant.
The rules regarding financial promotions are expected to get tougher in the aftermath of the London Capital and Finance collapse. The £236m lender went bust in January 2019 after selling highly risky mini-bonds. 11,600 investors lost money as a consequence.
While the FCA was regulating the financial promotion of bigger bonds, the small mini-bonds London Capital & Finance sold through promises of returns of 8% were not regulated.
The regulator had to tackle an extensive backlash because it was not clear to what scope it was regulating the lender. This became especially apparent by the end of January 2020 when the official inquiry into the scandal heard several of the investors who lost money.
As a consequence, the FCA is expected to make the rules clearer, something MirrorWeb has expected will happen sooner rather than later as the leadership of the regulator is set to change as chief executive Andrew Bailey is leaving the organisation.
Copyright © 2018 RegTech Analyst
