Following its Discussion Paper, published in April 2021, FCA published a consultation paper (CP22/2) on 19th January 2022 titled "Strengthening our financial promotion rules for high risk investments, including cryptoassets".

The FCA is acting to address concerns about the ease and speed with which people can make high-risk investments by proposing a significant strengthening of the rules on how high-risk financial products are marketed.  This is part of the FCA's Consumer Investments Strategy, published in September 2021, which aims to give consumers the confidence to invest and reduce the number of people who are investing in high-risk products that are not aligned to their needs.

 The CP propose to make changes in the following areas:

• Classification of high‑risk investments: Industry feedback has been that the FCA's existing marketing restrictions are difficult to navigate and to understand.  FCA intends to rationalise the rules in COBS 4 under the terms ‘Restricted Mass Market Investments’ and ‘Non‑Mass Market Investments.’ 

• The consumer journey into high‑risk investments:  The FCA is concerned that too many consumers are just ‘clicking through’ and accessing high‑risk investments without understanding the risks involved. The existing marketing restrictions are intended to ensure consumers only access high‑risk investments knowingly, but FCA's consumer research shows this approach isn’t working as well as it should.  FCA is proposing a package of measures to strengthen it by: strengthening risk warnings, banning inducements to invest, introducing positive frictions, improving client categorisation and stronger appropriateness tests.

• Strengthen the role of firms approving and communicating financial promotions: FCA wants to strengthen the role of a "section 21" approver as they play an important role in enabling unauthorised issuers of high‑risk investments to reach consumers.  FCA wants to develop a robust regime which will hold s21 approvers to high standards. 

• Applying the rules to qualifying cryptoassets: 

The Treasury has confirmed it intends to extend the scope of the financial promotion perimeter to include qualifying cryptoassets and the CP includes proposals on how FCA will categorise these cryptoassets once they are brought into the financial promotion regime. The intention is to apply the same rules to cryptoassets as currently apply to Non‑Readily Realisable Securities and Peer‑to‑Peer agreements (collectively this will become the ‘Restricted Mass Market Investments’ category). 

The CP does not consult on extending the application of the Speculative Illiquid Securities (e.g. mini-bond) rules.  The FCA plans to revisit this issue later in 2022.

The next steps have pretty short timescales.  Comments are invited by 23rd March, and the FCA intends to publish final rules in the summer.