U.K. regulator to combat unsuitable investments, fraud

By James Langton | September 15, 2021 | Last updated on September 15, 2021
2 min read
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Amid concerns about poor advice and unsuitable investments, along with investment frauds and scams, the U.K.’s Financial Conduct Authority (FCA) is planning to adopt a strategy to combat an array of ills in the retail investment sector.

Over the next three years, the regulator will undertake a variety of initiatives that it hopes will improve investors’ results in several areas by “giving consumers the confidence to invest, supported by a high-quality, affordable advice market, which should lead to fewer people being scammed or persuaded to invest in products too risky for their needs.”

Among other things, the FCA aims to cut in half by 2025 the number of investors in risky, unsuitable products.

At the same time, the regulator wants to reduce by 20% the number of investors stuck on the sidelines. It reported that 8.6 million investors hold more than £10,000 worth of investable assets in cash.

To that end, it plans to explore possible regulatory changes to make it easier for firms to serve investors with relatively straightforward products; to launch a consultation on its registration regime, with the aim of raising the quality of financial advice; and to revise its rules around high-risk investments.

The FCA will also review the investor compensation framework “to ensure that it remains proportionate and appropriate.”

Alongside efforts to enhance investors’ experience, it’s also planning to step up its efforts against investment fraud. The FCA reported that investors lost nearly £570 million to investment fraud in 2020–2021, an amount that has tripled since 2018.

To combat fraud, the FCA is planning to launch a new £11 million education campaign, while also pledging to be “more assertive and agile in how the FCA detects, disrupts and takes action against scammers.”

“We want to give consumers greater confidence to invest and to help them do so safely, understanding the level of risk,” said Sarah Pritchard, executive director of markets at the FCA, in a release.

“The package of measures we have announced today are intended to support that — we want people to have greater confidence to invest. We also want to be able to adapt more rapidly to the changing market and be assertive where we see poor conduct and consumer harm.”

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James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.