Telephone 020 3813 2890 for a free no obligation chat about your regulatory requirements with one of our compliance consultants.

© Compound Growth Limited 2012 - 2019 | Terms of Use

Registered in England and Wales as limited company number 07626537 - Registered Office 120 Pall Mall, London, SW1Y 5EA

We use cookies, if you consent to this use, please continue to browse our site.

Here to help with Regulation and Compliance

Compound Growth

Dear CEO Letter: Unregulated Business & Financial Promotions

14 January 2019

Dear CEO Letter – Clarity in Financial Promotions & Unregulated Business

Last week the FCA published a Dear CEO Letter to all regulated firms in relation to the use of financial promotions and a firm’s responsibilities in this regard.

The reason this has now been issued is that the regulator has recently become aware that some firms have been issuing financial promotions which suggest or imply that all of the activities they undertake are regulated by the UK regulators, when in fact they are not.

This Dear CEO Letter therefore reminds senior managers and the board of what constitutes “fair, clear and unambiguous financial promotions.”

What can be a Financial Promotion?

As we have spoken about previously, financial promotions can be any form of communication that invites or induces engagement in investment activity. Thus, this could be in the form of a website, Facebook post, tweet, newspaper or TV advert etc. Financial Promotions can form a significant part of a consumer’s product knowledge, and can influence a consumer’s decision making when choosing a product. Therefore, to ensure that consumers can make informed decisions, it is very important that financial promotions are fair, clear and not misleading.

Therefore, regardless of media type, all financial promotions must be clear, fair and not misleading.

Promoting Unregulated Business

Within the Dear CEO Letter, of particular note was the regulator’s reminder of rule GEN 4.5.4R that states

The Executive Director of Supervision at the FCA said last week. “It is completely unacceptable for firms, which are regulated for some of their business, to market unregulated investments by implying to customers that all their business is regulated. We are committed to stamping out this misleading practice and recommend that customers should ask firms whether what they are buying is really regulated by the FCA.”

Financial Promotions: Promoting Overseas Affiliates

Where firms are promoting their overseas affiliates, they should remember to remain vigilant and compliant with the applicable FCA rules, and in particular, those rules detailed within COBS 4.9 for Financial Promotions with an Overseas Element.

For example, unless a financial promotion makes it clear which firm has approved or communicated it, then it is not compliant with COBS 4.9.3R. Furthermore, the promotion may require accompanying explanation relating to the applicability of the protection of retail clients and the extent and level of any compensation scheme if available.

Product intervention measures & Financial Promotions: CFD & Spread Betting

With regulators paying particular attention to the CFD and Spread bet markets at present, CFD and spread bet providers should pay particular attention to their communications with investors and potential investors.  Product intervention measures have been in force since August last year that restrict the marketing, distribution and sale of CFDs, including rolling spot forex and financial spread bets to retail clients. Therefore, firms that promote CFD and Spread bet activities should tread carefully and be absolutely certain they are fully compliant with all applicable regulatory requirements before approving any communication that could be seen as a financial promotion.

Under the current product intervention measures, CFD and spread bet providers must:

In addition, ESMA’s product intervention measures have a ‘no circumvention’ clause that expressly prohibits knowingly or intentionally participating in activities, the object or effect of which, is to circumvent their product intervention requirements. Thus CFD and Spread bet Firms should therefore be reminded to pay close attention to their actions if promoting CFDs for overseas affiliates, should their actions be seen to be trying to circumvent ESMA’s intervention.

Next Steps:

The Regulator has encouraged all firms to read and reflect on the contents of their Dear CEO Letter and be sure that they understand the FCA’s rules on financial promotions. Firms need to ensure their communications comply with the FCA rules on financial promotions and that they are fair, clear and not misleading before being approved.

Firms should also bear in mind that, depending on the product type they are promoting e.g. the CFD and Spread Bet example above, financial promotions may also need to comply with other specific rules and regulatory requirements.

Whilst is a firm that has to ensure their financial promotions remain compliant, the FCA has reminded firms that they monitor adverts across all types of media in the UK and that should it be required, they have the power to ban a promotion or advert.

Related reading:

Compliance Support from Compound Growth Ltd

Please contact our Compliance Support Team for a free no obligation discussion of your regulatory requirements and how our regulatory & compliance consultants can help your business move forward compliantly.

Send Email

Call by Telephone:

(020) 3813 2890

News & Views News & Views

Read our latest articles, news and views affecting compliance and regulation in the UK Financial Services Industry.

Clear, fair & not misleading

“We have recently become aware of firms issuing financial promotions which suggest or imply that all of the activities which they undertake are regulated by us and/or the PRA when they are not.”

Financial Conduct Authority,

9th January 2019