The aim is to reduce the number of people who are investing in high-risk products that are not aligned to their needs.

The proposed rules follow feedback to a discussion paper published in April 2021.

The proposed rules would ensure firms that approve and communicate financial marketing have relevant expertise and understanding of the investments being offered, improve risk warnings on ads and ban incentives to invest, such as new joiner or refer-a-friend bonuses.

Those looking to make certain high-risk investments would also be asked, “more robust questions” about their knowledge and investment experience.

The draft rules include restrictions on the marketing of crypto assets.

The regulator plans to categorise qualifying crypto assets as ‘Restricted Mass Market Investments’ when the promotion of crypto assets comes under its remit - as the government plans.

This means that consumers would only be able to respond to cryptoasset financial promotions if they are classed as restricted, high net worth or sophisticated investors.

Firms issuing crypto asset promotions would have to adhere to FCA rules, such as the requirement to be clear, fair and not misleading.

The Treasury confirmed plans to bring cryptoasset promotions within the scope of financial promotions legislation yesterday.

In a response to an FCA consultation on the subject, the Treasury said that it was eager to support cryptocurrency innovation but there was a potential for consumer harm due to misleading adverts.

It confirmed that it will make amendments to the Financial Services and Markets Act 2000 to include cryptocurrency within the range of financial products which cannot be promoted unless the business is authorised by the FCA or PRA.

Sarah Pritchard, executive director of markets at the FCA, said: “Too many people are being led to invest in products they don’t understand and which are too risky for them. People need clear, fair information and proper risk warnings if they are to invest with confidence, which is the central aim of our consumer investment strategy.”

The FCA has requested feedback to the proposals by 23 March and intends to confirm its final rules in the summer.

The consultation paper can be found on the FCA website. 

The FCA aims to halve the number of people investing in high-risk assets who are vulnerable or have a low risk tolerance, according to Laura Suter, head of personal finance at platform AJ Bell.

She said: "There has been a boom in people investing during the pandemic, and in turn there has also been a steep rise in the number of newcomer investors putting their money in high-risk, inappropriate investments. The FCA wants to curb this trend and make it harder for novice investors to sleepwalk into buying high-risk investments. The regulator plans to tighten the rules on some investments, like mini-bonds, peer-to-peer and certain crowdfunding, so that investors can’t just buy them with a few clicks of the mouse.

"Hot on the heels of the announcement by the Treasury yesterday that rules around cryptocurrency advertising will be made stricter, the regulator also plans to bring in more rules on advertising high-risk investments. Firms will no longer be able to offer refer-a-friend offers or free money to encourage people to invest, and the risk warnings on adverts will also be strengthened."