FCA to crack down on investment harm

The Financial Conduct Authority is to crack down on scams in the £1.6trn consumer investment market, it was announced on Wednesday.

According to the FCA, the UK consumer investments market accounts for £1.6trn, which is held or invested by consumers through 6,000 specialist wealth managers, advisors and investment platforms.

But the regulator said that while most of the market was meeting consumer needs, harm was still occurring in some areas.

It has therefore set a number of targets to be met by 2025, including halving the number of consumers investing in unsuitable high-risk products, and reducing the money consumers lose to scams perpetrated or facilitated by regulated firms. Nearly £570m was lost to investment fraud in the 2020/21 year, triple the amount in 2018.

It also wants to "stabilise" the £833m compensation bill for the Financial Services Compensation Scheme, and target a year-on-year reduction in the Life Distribution and Investment Intermediation funding classes from 2025 to 2030.

To achieve this, the FCA said it would launch an £11m investment harm campaign, to raise awareness; would strengthen the appointed representatives regime, with the intention of raising the quality of financial advice; tighten the financial promotions regime in certain areas; and review the compensation framework to ensure it remains "proportionate and appropriate".

Sarah Pritchard, executive director of markets at the FCA, said: "Investors have never had more freedom. Technology has democratised the market, new products have become available, and people have better access to their lift savings. But that freedom comes with risk. We want to give consumers greater confidence to invest, and to help them do so safely, understanding the level of risk."