Financial promotions data 2023

Proactive action, monitoring new websites

We continue to use various tools to proactively identify websites and social media that promote financial services without appropriate authorisation. We assessed around 140,000 websites which resulted in just over 4,700 websites and social media platforms being reviewed which led to over 1,500 alerts being issued.

Previous applicant firms

We reviewed 350 firms who had previously applied to the FCA for authorisation but had later withdrawn or had their application rejected. We identified 24 of these firms had active websites promoting products and services without appropriate permission. Through our intervention and correspondence with firms, we identified that most of these firms had created websites in anticipation of becoming authorised. Firms duly removed or amended their websites to ensure compliance with Financial Services and Markets Act 2000 (FSMA).

Linked companies at UK Companies House

We identified a small network of 5 firms and linked websites registering themselves with UK Companies House using a residential location in Greater London. All these firms’ websites were in breach of s21 of FSMA. From this work, we conducted further research and analysis to identify the network had expanded to over 90 UK registered firms at the same residential location. We also identified an increased number of live websites presenting the same s21 FSMA concerns and issued 11 alerts to the FCA Warning list and requesting suspension of the infringing websites.

Taking action against unauthorised business

In 2023, 24,865 reports were received about potential unauthorised business. Where we identify sufficient and credible evidence of a breach of legislation, the matter is escalated to enable more detailed enquiries. The most serious cases are referred to our Enforcement and Markets Oversight Division for investigation. We also capture relevant intelligence, issue alerts on our website to warn consumers about our concerns at the earliest opportunity and make referrals to specialist teams, law enforcement agencies and other regulators where appropriate to facilitate wider action.

To ensure consumers are protected from financial promotions that are misleading, unclear, or unfair there have been several recent, and forthcoming, changes to strengthen the financial promotions regime.

New regulation

Cryptoasset financial promotions regime

In June 2023 we published our Policy Statement, PS23/6[9], following the government legislating to bring the promotion of cryptoassets within our remit. The rules came into force on 8 October 2023; however, firms had the option of applying for a modification by consent[6] to delay the implementation of the requirements for the ‘back end’ rules until 8 January 2024.

We have engaged in a variety of actions to test firms’ compliance with the ‘front end’ rules. Where firms are engaging with the FCA in good faith with a view to achieving compliance, we have taken a proportionate approach to implementation. But in the case of non-compliance, we have taken robust and assertive action to protect consumers.

We have conducted reviews of 44 crypto firms registered with us for anti-money laundering purposes and unregistered firms whose promotions have been approved by an FCA authorised person. These reviews included websites, mobile apps, social media and advertising. We found significant levels of non-compliance with our rules. We have provided feedback to firms outlining our concerns and asked them to take action to rectify the breaches and conduct full reviews of their promotions to ensure they are compliant with our rules.

As a result of these reviews, we have identified several themes including:

• the use of affiliates and ‘finfluencers’ to promote the firm
• using generic risk summaries without amendments for product-specific risks (for example risks relating to stablecoins or asset-backed coins)
• risk warnings not being visible enough due to small fonts, hard-to-read colouring or non-prominent positioning
• using their regulated status in a promotional manner
• promotions making claims about the ‘safety’, ‘security’ or ease of using cryptoasset services without supporting evidence or highlighting the risks involved

We released a statement[7] shortly after the rules came into force outlining the common issues, we had identified in the first days of the rules being implemented. In November we published non-handbook guidance[8] on Cryptoasset financial promotions. The guidance does not set new requirements but helps firms to understand the implications of the requirements on them and provides detailed information of our expectations.

Since the modification by consent expired on 8 January 2024, we have been conducting reviews of the level of compliance with the ‘back end’ rules. We will take action against breaches, using our supervisory tools when we identify persistent breaches and potentially using enforcement action where necessary.

We have also explored the suitability of authorised firms who are approving financial promotions for unregistered crypto firms (s21 approvers). We expect s21 approvers to take their regulatory obligations seriously given the key role they play in allowing overseas firms to promote to UK consumers. Where this is not happening, we will take action. We have placed requirements on one firm to restrict it from approving cryptoasset financial promotions. Another firm has voluntarily agreed to requirements to restrict it from approving cryptoasset financial promotions. We will continue to hold s21 approvers to the high standards we expect, particularly around their knowledge, competence and expertise, to ensure they are able to appropriately approve compliant promotions and identify non-compliance. 

We have taken significant action against firms illegally promoting to UK consumers. Between 8 October 2023 (when the regime came into force) and 31 December 2023, we have issued 450 consumer alerts against firms illegally promoting cryptoassets. We are working with tech companies to remove and block illegal promotions, including websites, mobile applications (apps) and social media accounts. For example, our work has resulted in 35 apps being removed from App Stores at the end of December 2023.  We will be continuing our robust action against firms issuing illegal financial promotions in 2024.

We remain concerned that regulated firms are not doing enough to meet their own obligations when providing support services, such as payment services, to crypto firms that are illegally promoting to UK consumers.  We are engaging with these firms to remind them about their regulatory obligations including, but not limited to, carrying out appropriate due diligence on their clients, KYC checks and ensuring that they are not dealing with the proceeds of crime. We expect to have a renewed focus on this area in 2024.

We are engaged with firms offering staking products to determine whether these products are unregistered collective investment schemes.

Section 21 Gateway

From 7 February 2024, authorised firms will need permission from us if they wish to approve promotions for unregulated persons. This will ensure that firms approving financial promotions have the required competence and expertise as well as adequate systems, controls and processes to ensure that any promotions they are approving comply with our rules. Once the gateway comes into force, firms must notify us when approving a new promotion when it relates to high-risk products subject to a retail mass-marketing ban or qualifying cryptoassets. Notifications are also required when an amendment is being made to a promotion or a firm is withdrawing their approval for a promotion because of concerns. We will be monitoring s21 approvals and will take action where we see promotions being inappropriately approved.

Strengthening our financial promotions rules

In February 2023 the new rules for firms promoting high-risk investments introduced by PS22/10 – Strengthening our financial promotion rules[9] came into effect. These rules included:

• a ban on promoting incentives to invest
• the introduction of a 24-hour cooling off period for new customers
• a personalised risk warning, clearer client categorisation and the requirement for new consumers to pass a robust appropriateness assessment before being able to commit to the investment

We conducted in-depth reviews of 13 firms offering restricted-mass market investments to test their compliance with these rules. We found varying levels of compliance from these firms and issued detailed feedback outlining our concerns, as well as publishing our overall findings[10] with examples of good and poor practice for the consideration of the wider industry.

Raising market standards

During the year as part of our proactive work, we reviewed financial promotions of:

• firms who offer debt advice/packager services
• funeral plan providers
• firms who offer later life lending
• providers of enterprise investment schemes
• crypto firms
• credit builder firms and firms who had repeated non-compliance of the financial promotions rules

This proactive work resulted in 1401 (14% of the 10,008) promotions being amended or withdrawn during 2023.

We take matters of non-compliance with our rules seriously, and will consider what further suitable action to take, which can include using our intervention powers, where appropriate.

Debt Packager Referral Fee Ban

From 2 June 2023, the new rules banning debt packagers[8] from receiving referral fees came into force. Following a 3-month implementation period, the rules applied to existing firms effective 2 October 2023. Debt packager firms must not receive any commission, fee or any other financial consideration from a debt solution provider for any referral or related service conducted. For firms who have chosen to cancel their relevant debt permissions, we will be proactively monitoring their promoted business activities and taking action should we identify breaches of FSMA.