UK introduces new rules for promotion of high-risk assets; crypto in the crosshairs

The U.K’s Financial Conduct Authority (FCA) has chalked out tougher rules for the marketing of high-risk investment products, but the new rules do not yet apply to cryptocurrency promotions, according to an Aug. 1 press release.

The FCA is waiting for the passing of legislation to see how crypto promotions come under its purview before publishing final rules for the industry, the press release said.

According to the regulator, cryptocurrencies are high-risk assets, and investors should be prepared to lose all money if they invest in them. Therefore, the rules for crypto marketing will follow the same approach as the new rules introduced for other high-risk assets.

Under the new rules, firms need to clearly and prominently state risk warnings while incentives to invest like referral systems are banned.

The rules come as part of the FCA’s consumer investment strategy to reduce the number of people investing in high-risk assets, the regulator said. The FCA’s step follows concerns that a significant number of high-risk asset investors do not properly understand the risks involved and do not think losing money is one of the risks.

The FCA has been undertaking an active role in tackling financial promotions this year. As of July 2022, the FCA intervened in 4,226 advertisements and forced them to be amended or withdrawn.

Sarah Pritchard, FCA 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.”

According to Pritchard, it is more important than ever that high-risk financial products come with the right risk warnings since the increase in the cost of living could drive people to look for higher returns through high-risk investments.

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