The Financial Conduct Authority is to introduce tougher rules to tackle “misleading adverts” that encourage consumers to invest in high-risk products. 

In future any firms approving and issuing marketing of high risk products must demonstrate “appropriate expertise” before doing so.

The FCA will also require firms marketing some types of high-risk investments to conduct better checks to ensure consumers and their investments are “well matched.” 

Firms selling high risk products will also need to use clearer and more prominent risk warnings and some incentives to invest, such as ‘refer a friend bonuses’, are now banned. 

The FCA says the changes, announced today, are part of its Consumer Investments Strategy.  The FCA says the changes should reduce the number of people who are investing in high-risk products without understanding the risks they face or the risks they want to expose themselves to. 

The move follows growing concern that many who invest in high-risk products do not view losing money as a risk of investing and invest without fully understanding the risks they face. 

The rules will bolster what the FCA calls its “more assertive and interventionist approach to tackling poor financial promotions”. It aims to reduce the potential for unexpected consumer losses. 

In the last year the FCA says it has intervened in “significantly more” financial promotions to prevent harm. In the year to the end of July, 4,226 adverts were amended or withdrawn after intervention from the FCA. 

The new rules will not apply to cryptoasset promotions. Once the Government and Parliament confirms in legislation how crypto marketing will be brought into the FCA's remit, the FCA will publish final rules on the promotion of qualifying cryptoassets, it said. These rules are likely to follow the same approach as those for other high-risk investments. The FCA warns that crypto remains high risk so people need to be prepared to lose all their money if they choose to invest in cryptoassets. 

Sarah Pritchard, executive director, markets said: “We want people to be able to invest with confidence, understand the risks involved, and get the investments that are right for them which reflect their appetite for risk. 

“Our new simplified risk warnings are designed to help consumers better understand the risks, albeit firms have a significant role to play too. Where we see products being marketed that don’t contain the right risk warnings or are unclear, unfair or misleading, we will act. 

“This is even more important now because increases in the cost of living could prompt people to chase higher investment returns which may prove risky.”  

• The FCA has also launched a consultation which could see Long Term Asset Funds (LTAFs) marketed to a wider group of retail investors and schemes in future.