Raising standards in new firms and financial promotions

We’ve created a new function to help newly-authorised firms adapt to our supervision as they start up and grow, protecting consumers from bad practice. 

We know that newly-authorised firms can sometimes struggle with our rules. Many of these firms can grow quickly in their early stages, meaning that any problems can affect many consumers in a relatively short space of time.  

So, rather than wait until things go badly wrong, we’ve created a new Early and High Growth Oversight function that provides closer supervision and help through the first stages of being authorised. This work raises standards, helps us spot and act on potential harm sooner, and promotes competition. 

Identifying common problems 

During 2021 to 2022, we ran a pilot with 32 newly-authorised firms to help them adapt to our supervision, understand our requirements and improve their standards where they needed to.  

This pilot found one of the most common themes was how well these firms understood our rules on promoting financial products to the public.  

Some firms were describing their products and services as 'FCA approved' on their websites. We don't 'approve' firms' offerings; we authorise firms and give them permission to offer regulated products and services. 

Similarly, firms wrongly claimed on their websites 'We worked with the regulator to deliver a product/ service'. We don’t work with firms to develop what they offer. 

Three women in an office meeting

Some firms were advertising services that we hadn’t given them permissions for. Consumers have much less protection if they sign up for services the firm doesn’t have our permission to provide, and we can take action against them if they do this. 

And some were advertising attractive investment returns they couldn’t substantiate. Again, this was misleading, potentially attracting customers with rates they’d never get. 

Helping firms raise their game 

We intervened in each case, making sure firms made the necessary changes, and we’ll continue to monitor them.

We also provided webinar training to around 500 attendees, to remind them of our financial promotions rules and share examples of the common pitfalls we find on firms' websites.

We’ve now launched Phase 2 of the pilot, increasing the number of newly-authorised firms we’re reviewing to 300. We’ll use the findings of this next stage to identify other common areas where firms need to raise their standards to meet our rules.