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Managing Financial Promotion Risk (from unauthorised colleagues)

Marketing Team


Financial promotions and how they are regulated is becoming an increasingly hot topic for the industry.  

A perfect storm has been brewing – a combination of the LCF scandal, an under-pressure FCA and incoming change of leadership at the regulator – making this area of regulation ‘ripe’ for overhaul (to quote FCA chairman Charles Randell).

Under the FCA’s rules, authorised firms are required to have rigorous systems and controls in place to ensure any financial promotions created meet all the mandatory requirements. Having a working knowledge of financial regulations is part of the job for authorised people with regulated roles. However, a great amount of financial promotions will be created in the first place by those who are unauthorised – namely marketing teams.

The FCA has been active in reminding firms of their responsibility with financial promotions, issuing two ‘dear CEO’ letters in 2019 to clarify the expectations the regulator has. However, following the LCF scandal – and the introduction of a temporary intervention on the marketing of speculative mini-bonds to retail investors – the regulator decided more work was required here.

Towards the end of last year, in November, the FCA issued a new guidance note on the rules regarding financial promotion regulations and their implementations. However, the regulator was keen to stress: “[this guidance note] explains some practical implications of our existing requirements, rather than setting out new standards.”

Much of this guidance note simply stressed existing financial promotions, as a way of making sure firms are aware of what is exactly required of them. We’ve previously covered – in our blog ‘The Rise Of DIY Marketing In Financial Services' – the need for thorough and efficient systems within financial services firms to ensure regulations regarding promotions are met throughout the creation process.

In its November 2019 guidance note, the FCA was keen to banish any room for interpretation or allow for regulations to slip through the gap. Under the subheading ‘reliance on others’, the FCA stated:

“When approving a financial promotion of, and for communication by, an unauthorised person, it is unlikely to be appropriate to accept at face value information provided by the unauthorised person. You should form your own view as to whether the promotion complies with our financial promotion rules.”

The FCA is clear: financial promotions created by unauthorised colleagues shouldn’t be assumed to be complaint with the rules. Therefore, it’s important to have thorough internal approval systems in place and ensuring unauthorised people are fully up to speed which the regs and the standards expected of the financial promotions they create.

Creating compliant promotions that still retain some creative flair and – for the lack of a better term – oomph, is important, but it is also vital to ensure you can demonstrate regulations are being met.

Having adequate records isn’t just about corporate best practice, or making life a little easier for everyone working in compliance departments (in that disputes and queries can be easily remedied). It has to be remembered this is a regulatory requirement too.

Again, not leaving anything to doubt, the FCA included this in its guidance note:

“You are also reminded of the importance of maintaining adequate records of the financial promotions which you approve (COBS 4.11.1 R (1)). When you approve a financial promotion, you should consider recording how the promotion complies with our rules (COBS 4.11.2 G).”

Keeping records in a way that is thorough, efficient and able to appease regulatory requirements has clearly never a higher priority for firms. With the FCA repeatedly issuing guidance and reminders on financial promotion regulations, it would be wise for regulated firms to ensure they have the best systems and processes in place.

Being able to demonstrate you comply with regulations is now almost as important as meeting them in the first place. With the onus on evidence now critical, many firms use solutions such as the MirrorWeb Platform which creates reliable and 100% accurate web records of their web channels so they can evidence what was published and when, with full accuracy. 

If you'd like to find out how our platform is helping regulated firms capture, archive and monitor electronic communications (and meet MiFID II, FCA, GDPR and FINRA requirements) then simply request a demo by clicking below.  

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