Introduction

The FCA has published its latest analysis and insights on data it has gathered between January and December 2024 on financial promotions breaches by authorised firms and unregulated activity.

In its analysis, the FCA expresses concerns about the risks posed by unclear and misleading financial promotions, particularly given the complexity and long-term nature of financial products. With its focus on outcomes, the FCA notes that good quality marketing information helps ensure consumers get good outcomes.

The FCA expects firms to read the analysis it has published and to take action to ensure they deliver good consumer outcomes.

Increased FCA interventions

The FCA has turned to data and technology to increase its capacity to identify and assess financial promotions. In 2024, it assessed approximately 480,000 new websites that may be operating without FCA permission. This led to 19,766 promotions being withdrawn or amended, an increase of 97.5% when compared to 2023. The FCA also issued voluntary requirement requests to 18 firms and used its own initiative powers to restrict two firms from promoting financial products. Additionally, 20 "finfluencers" were interviewed under caution and 38 alerts were issued against "finfluencer" social media accounts.

Section 21 Gateway

Since 7 February 2024, firms have needed the FCA's permission to approve promotions for unregulated persons (the Section 21 Gateway). Firms applying for permission under the Section 21 Gateway are assessed for competence and expertise, as well as whether they have adequate systems, controls and processes. The FCA is clear that the approval process under the Section 21 Gateway is not just a formality.

  • Section 21 approvers are subject to a number of obligations, including regular six-monthly reporting. The FCA has highlighted in its first review of reporting that it expects approvers to obtain information on complaints about approved promotions and to properly attribute revenue to the approval process.
  • The approval requirement covers all media formats for financial promotions and a Section 21 approver must ensure their contract for approvals similarly covers all media formats, including social media and mobile apps.

The FCA also highlighted an example of good practice in which a firm approved under the Section 21 Gateway uses software to monitor approved financial promotions on its clients' websites and to identify any changes to the website that the firm can proactively investigate.

Cryptoasset firms

Throughout 2024, the FCA conducted reviews to assess cryptoasset firms' compliance with the financial promotions regime introduced in October 2023. The FCA has engaged with cryptoasset firms, providing feedback following its review of financial promotions and taking further action where breaches were identified. In particular, the FCA is interested in the authorised firms providing fiat-to-crypto on/off ramp services to unregistered cryptoasset firms and their role in ensuring the protections offered by the financial promotions regime are effective.

The FCA's particular focus on cryptoasset firms recognises that this is the first conduct regime for cryptoasset firms and it is therefore likely to present new challenges for firms to ensure compliance.

The FCA has also published more guidance to support cryptoasset firms in meeting their obligations under the financial promotions regime. The FCA has been clear that firms are expected to consider this guidance and should not rely on industry comparisons for best practices as it recognises that there are widespread poor market standards.

It should be noted that the FCA intends to review a firm's compliance with regulatory requirements, including the financial promotions regime, as part of any application to be authorised under the future financial services' regulatory regime for cryptoassets.

Social media and finfluencer oversight

The FCA finalised guidance on financial promotions on social media in March 2024. Social media is an increasingly important part of firms' marketing strategies and enables firms to reach large audiences. The FCA's action in this space indicates the importance of ensuring all promotional channels and formats comply with FCA requirements. In the FCA's view, a lot more work still needs to be done by social media platforms and the FCA wants to see them taking stronger action to identify and stop illegal promotions.

Vulnerable customers

The FCA has focused on promotions that are more likely to impact vulnerable consumers, with particular scrutiny on claims management companies (CMCs) and firms providing debt advice and solutions. Common regulatory breaches have involved CMCs offering services for housing disrepair or motor finance claims. The FCA is particularly concerned that consumers targeted by housing disrepair claim promotions may exhibit characteristics of vulnerability.

Additionally, the FCA continues to take action against unauthorised firms promoting such services, particularly on social media platforms like TikTok. It is concerned that vulnerable consumers are being steered towards fee-based services that may not be suitable for their needs, despite the availability of free debt advice and potentially more appropriate solutions.

Conclusion

Financial promotions remains an area where the FCA is keen to drive higher standards and to see firms putting customer outcomes at the heart of their business. Firms should anticipate that the proactive stance of the FCA in 2024 will continue, especially in those areas of concern such as social media promotions, cryptoassets and the approver regime. With the anticipated regulation of BNPL this year, firms who offer BNPL products can also look forward to further rules on the promotion of those products and FCA oversight of their promotions.