Treasury plan would close FCA loophole
FINANCE firms will be unable to promote high-risk unregulated investments without specific permission from the City watchdog under new proposals to protect the public.
Companies regulated by the Financial Conduct Authority will in future need approval for every product they market which is offered by an unauthorised company if the plans go ahead.
It follows a string of scandals in which investors were persuaded to pump their money into dangerous projects by finance companies. This includes the collapse last year of London Capital and Finance, which went bust owing £237m to 11,500 people.
The Treasury plan intends to sew up a loophole which allows companies that are themselves overseen by the FCA to market investments that exist outside the so-called regulatory perimeter – meaning they are not vetted by the watchdog. Some of these include ultra-risky punts on foreign holiday developments or energy projects. Proposals also include a crackdown on the digital currency market, bringing certain types of crypto currency under the FCA’s scrutiny for the first time.
Bitcoin and rival online money promotion would be regulated more tightly.
John Glen, the City Minister, said: “It’s important that people can understand the financial products they see promoted. If adverts by unauthorised firms are misleading, or don’t fully outline the risks, then people can end up losing money.”
Around 2.6million people have now purchased some form of crypto asset, according to FCA research. More than a third who did so said they were encouraged to via an advert, with 83pc of buyers making purchases via exchanges based outside of Britain.