PIMFA
26 October 2020
PIMFA calls for the approval of unregulated financial promotions to be a regulated activity
PIMFA, the trade association for the wealth management and financial advice industry, has today called on the Government to tighten the rules around the promotion of unregulated financial products.
Responding to HM Treasury’s consultation on the approval of financial promotions, PIMFA has called for the approval of unauthorised financial promotions to become a regulated activity, having previously raised concerns about the issue and its impact on the industry and consumers alike.
This issue is particularly salient in the current era of ultra-low interest rates and financial anxiety many are suffering due to the pandemic, as a proportion of consumers will be attracted by investments that purport to offer returns far in excess of the rest of the market. All too often consumers are told such investments are low risk, while offering high returns. Moreover, such products are not always marketed to sophisticated or high-net-worth investors and are often marketed to those on lower incomes or inexperienced savers.
By making the approval of financial promotions a regulated activity, the Government would be empowering the Regulator and enabling it to take enforcement action on firms that approved unsuitable investments without the necessary expertise or due diligence.
Additionally this would encourage firms to consider their own practices given the added weight that the undertaking of a regulated activity brings – in light of our concerns about the standard of regulatory supervision as well as the capacity of the Regulator at present, this should be welcome.
Simon Harrington, Senior Policy Adviser at PIMFA, commented: “Given the potential for harm for consumers, and the cost that then falls onto firms in funding the FSCS, we believe that it is right that a gateway is introduced for the approval of financial promotions.
“However, as a result of the experience of many of PIMFA’s member firms of being regulated, we retain very little confidence that the level of Regulatory oversight required in supervising the authorisation of financial promotions will be sufficient to prevent a reproduction of the current regime which, as the Treasury quite rightly notes is not sufficient and conducive to consumer harm.’
“Making the approval of financial promotions a regulated activity would mean the FCA could take enforcement action against those firms that approve unsuitable investments without having the necessary expertise to do so.
“This will improve the market; reduce consumer harm and ultimately reduce calls on the Compensation Scheme where rising levies over the last five years have become unsustainable for PIMFA members. This is an easy win for all parties involved and we are urging them to grasp this opportunity.”
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Notes for Editors
About PIMFA – the Personal Investment Management & Financial Advice Association
· PIMFA is the trade association for firms that provide investment management and financial advice to everyone from individuals and families to charities, pension funds, trusts and companies.
· The sector currently looks after £1.5 trillion in private savings and investments and employs over 55,000 people.
· PIMFA represents both full and associate member firms. Full members provide a range of financial solutions including financial advice, portfolio management, as well as investment and execution services. They assist everyone from individuals and families, to charities and pension funds, all the way to trusts and companies. Associate members provide professional services to the PIMFA community.
· More information read PIMFA’s positions on FCA Supervision is available in our recent Future of Supervision white paper as well as PIMFA”s recent member insights paper.
· PIMFA leads the debate on policy and regulatory recommendations to ensure that the UK remains a global centre of excellence in the wealth management, investment advice and financial planning arena. Our mission is to create an optimal operating environment so that its member firms can focus on delivering the best service to clients, providing responsible stewardship for their long-term savings and investments.
· PIMFA was created in 2017 as the outcome of a merger between the Association of Professional Financial Advisers (APFA) and the Wealth Management Association (WMA) with a history as a trade association since 1991 – read more.
· Further information can be found at www.pimfa.co.uk
Contact
For further information on this release or other press matters please contact:
· Matthew West, PIMFA PR Manager – MatthewW@pimfa.co.uk, +44 (0)20 7382 0376
· Sheena Gillett, PIMFA Communications & PR Director – sheenag@pimfa.co.uk, +44 (0)20 7011 9869 / +44 (0)7979 493225
