This proposal comes as the FCA revealed that 2020 saw a sharp increase in scams and promotion of higher-risk investments as negative actors sought to profit from the COVID-19 pandemic. According to the Review consumer enquiries about potential scams rose 23% on 2019 to almost 20,000, with investment scams accounted for 57% of those enquiries.
Section 21 of the Financial Services and Markets Act 2000 prohibits persons from promoting financial services and products unless they are an authorised person. Most of the websites reviewed by the FCA fail to meet the requirements for those exemptions to apply. Furthermore, in late 2019 only approximately 20% of websites reviewed by the FCA were approved by an authorised person. Since August 2020 that figure has dropped to almost 0%.
The Review criticises the role of online platforms in facilitating communication of scams and high-risk investments to consumers and proposes an extension of the financial promotions regime to cover online platform operators, to hold them legally liable for financial promotions advertised on their platforms.
This means online operators should be more pro-active in policing the advertisements on their platforms or risk being subject to regulatory penalties.
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