The first quarter of 2023 has witnessed significant movements within the financial sector, particularly concerning financial promotions. With a 3x quarter-on-quarter increase in VREQs issued, there seems to be no slowing the FCA down. The FCA has been active in tracking breaches and ensuring that firms adhere to the financial promotion rules. Here, we delve into the data accumulated between January and March 2023, providing some pragmatic advice for financial institutions involved in financial promotions.

1. Key Takeaways from Q1

During Q1, the FCA's interventions led to amendments or withdrawals of 2235 financial promotions. A total of 611 alerts were issued concerning unauthorised firms and individuals, of which 12% were related to clone scams.

Notably, the FCA cracked down on misleading practices, including firms presenting themselves as non-profit or government entities and those incorrectly categorising investors as high net worth or sophisticated. With the rising cost of living, the regulator also scrutinised both authorised and unauthorised firms offering debt advice, resulting in nine alerts and two voluntary requirements.

2. Financial Promotions: A Breakdown

The FCA reviewed 539 financial promotions from various sources during Q1. The interventions resulted in significant amendments and withdrawals across sectors, with retail investments and retail lending leading the pack, accounting for 90% of interventions.

Regrettably, common breaches involved credit brokers, lenders, and firms promoting high-risk investments. This indicates a need for firms to reassess their promotional strategies, ensuring they align with FCA guidelines.

Retail investment firms are under particular scrutiny with a 3x increase in cases.

3. Unauthorised Firms: Rising Reports

The number of reports about potential unauthorised business is on the rise. In Q1, the FCA received 6989 reports, leading to 611 alerts – a 15% increase from Q4 2022. Among these, clone scams were predominant, calling for enhanced vigilance on the part of both firms and consumers.

4. Spotlight on the Interventions

The FCA's interventions during Q1 were aimed at preventing serious harm, setting higher standards, and promoting competition and positive change. A few significant cases are worth noting:

• A firm misusing consumers' funds was ordered to freeze its bank account and cancel its permissions for regulated activities.
• A firm using misleading trading names was compelled to remove all promotional material associated with that name.
• A firm incorrectly suggesting they could offer cost-free debt relief was forced to review their systems and controls.
• Several firms were found to be "rolling over" Speculative Illiquid Securities (SIS), potentially causing harm to consumers.

These cases highlight the FCA's commitment to protecting consumers and maintaining market integrity, and serve as a reminder to firms to uphold the highest standards.

5. Future Outlook

The FCA is not slowing down in its regulatory efforts. It has published sector letters to firms detailing Consumer Duty Expectations and is scrutinising adherence to new financial promotions rules for high-risk investments. The forthcoming rules for cryptoasset promotions are expected to have a considerable impact, with potential criminal sanctions for non-compliance.