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Saturday, December 9, 2023

FCA Issues 1,716 Warnings About Unregistered Firms From April 2022 to March 2023

The Financial Conduct Authority (FCA) has released
its consumer investments data review between April 2022 and March 2023,
highlighting 1,716 warnings issued against unauthorized individuals and
companies by the regulator.

During this period, the regulator barred 20% of new
consumer investment firms from entering the market. Besides that, the UK’s watchdog
secured £4.9m in consumer redress from unauthorized investment businesses.

However, amidst these proactive measures, the report disclosed some of the regulatory challenges in the UK. There was a notable surge of helpline inquiries
regarding potential scams, which jumped 12% since 2020, signaling persistent
threats faced by investors.

Specific scams, including recovery room scams (21%),
FCA ↗ impersonation scams (38%), and cryptocurrency scams (17%), have seen a
notable uptick in inquiries. A staggering 80% of inquiries regarding
potential cryptocurrency scams were made by investors after they had already
invested.

FCA Combats Unauthorized Activities under New Regulations

According to the report, the regulator focused on
curtailing unauthorized activities. The reports on potential unauthorized
businesses exceeded 25,000, prompting investigations and enforcement actions
against 212 firms and individuals.

Source: FCA

The FCA took a significant step in August 2022 by
bolstering its financial promotion regulations ↗ for high-risk investments. These
reforms aimed to enhance consumer awareness and elevate standards for firms
endorsing promotions for unauthorized individuals. By December 2022, the
initial set of regulatory changes was enacted, mandating improved risk warnings
in high-risk investment promotions.

However, shortly after the enactment of the regulations, a review of 67
crowdfunding and peer-to-peer firms revealed that 60% of the firms under assessment were non-compliant with the updated standards. Inquiries about scams surged
while investment product-related inquiries decreased.

Recently, the FCA introduced temporary measures ↗
enabling investment companies to offer clearer cost disclosures. The measures allow consumers to make informed investment choices. This move is in response
to concerns that existing disclosure rules generate ambiguous cost information.

FCA’s Measures in Financial Obligations

The FCA’s introduced measures empower funds to offer
additional context in their cost disclosures, addressing concerns that the
current aggregate figures might not accurately represent ongoing costs.
Additionally, the agency has encouraged firms to incorporate additional information
into their broader disclosure documents while evaluating their obligations
under the consumer duty.

Earlier proposals by the FCA ↗ mandated personal
investment firms to maintain adequate capital reserves for compensating
consumers affected by inadequate financial advice. This initiative implements a
“polluter pays” principle, ensuring firms take responsibility for the
impact of wrong financial advice.

Under the proposals, investment advisors must assess
potential liabilities, guaranteeing sufficient capital for
compensation. This measure aims to counteract substantial compensations
disbursed by the Financial Services Compensation Scheme due to substandard
advice.

The Financial Conduct Authority (FCA) has released
its consumer investments data review between April 2022 and March 2023,
highlighting 1,716 warnings issued against unauthorized individuals and
companies by the regulator.

During this period, the regulator barred 20% of new
consumer investment firms from entering the market. Besides that, the UK’s watchdog
secured £4.9m in consumer redress from unauthorized investment businesses.

However, amidst these proactive measures, the report disclosed some of the regulatory challenges in the UK. There was a notable surge of helpline inquiries
regarding potential scams, which jumped 12% since 2020, signaling persistent
threats faced by investors.

Specific scams, including recovery room scams (21%),
FCA ↗ impersonation scams (38%), and cryptocurrency scams (17%), have seen a
notable uptick in inquiries. A staggering 80% of inquiries regarding
potential cryptocurrency scams were made by investors after they had already
invested.

FCA Combats Unauthorized Activities under New Regulations

According to the report, the regulator focused on
curtailing unauthorized activities. The reports on potential unauthorized
businesses exceeded 25,000, prompting investigations and enforcement actions
against 212 firms and individuals.

Source: FCA

The FCA took a significant step in August 2022 by
bolstering its financial promotion regulations ↗ for high-risk investments. These
reforms aimed to enhance consumer awareness and elevate standards for firms
endorsing promotions for unauthorized individuals. By December 2022, the
initial set of regulatory changes was enacted, mandating improved risk warnings
in high-risk investment promotions.

However, shortly after the enactment of the regulations, a review of 67
crowdfunding and peer-to-peer firms revealed that 60% of the firms under assessment were non-compliant with the updated standards. Inquiries about scams surged
while investment product-related inquiries decreased.

Recently, the FCA introduced temporary measures ↗
enabling investment companies to offer clearer cost disclosures. The measures allow consumers to make informed investment choices. This move is in response
to concerns that existing disclosure rules generate ambiguous cost information.

FCA’s Measures in Financial Obligations

The FCA’s introduced measures empower funds to offer
additional context in their cost disclosures, addressing concerns that the
current aggregate figures might not accurately represent ongoing costs.
Additionally, the agency has encouraged firms to incorporate additional information
into their broader disclosure documents while evaluating their obligations
under the consumer duty.

Earlier proposals by the FCA ↗ mandated personal
investment firms to maintain adequate capital reserves for compensating
consumers affected by inadequate financial advice. This initiative implements a
“polluter pays” principle, ensuring firms take responsibility for the
impact of wrong financial advice.

Under the proposals, investment advisors must assess
potential liabilities, guaranteeing sufficient capital for
compensation. This measure aims to counteract substantial compensations
disbursed by the Financial Services Compensation Scheme due to substandard
advice.

BFIA Admin
BFIA Admin
The big boss.

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