FCA cracked down on unregistered firms with over 1,700 warnings in 12 months

The UK’s Financial Conduct Authority (FCA) recently released its consumer investment data review for a period between April 2022 and March 2023. The report shows that the financial watchdog had to issue as many as 1,716 warnings against unauthorized companies and individuals operating in the country.

The regulator’s data shows that, during the mentioned period, the FCA prevented one in every five consumer investment companies that had attempted to enter the market. Furthermore, the regulator also managed to secure 4.9 million GBP in consumer redress from unlicensed and unauthorized investment companies.

Regulatory challenges in the UK financial markets

In addition to the proactive measures detailed in the statement, the FCA also revealed some of the regulatory challenges that currently trouble the country. For example, there was a rather significant increase of helpline inquiries regarding potential scams. The figure went up by 12% compared to the numbers seen in 2020.

This suggests that the threats that make the financial sector risky for investors remain persistent. The FCA has also highlighted multiple specific types of scams, including recovery room scams that were seen in 21% of cases. There were also FCA impersonation scams, responsible for 38% of cases, as well as cryptocurrency-related scams, seen in 17% of cases.

All of the above have seen a significant uptick in inquiries. The real problem comes from the fact that investors fail to do their research prior to making an investment. The FCA had noted that as many as 80% of those who reported crypto scams did so only after they had already made an investment. At that point, it is often too late.

To prevent this, the FCA doubled down on curtailing unauthorized activities. The regulator had received over 25,000 reports on potential unauthorized businesses, which resulted in investigations and enforcement actions against 212 companies and individuals.

The FCA continues to introduce new changes for investors’ benefit

The UK’s financial watchdog also bolstered its financial promotion regulations in August 2022, focusing on high-risk investments. The reforms were meant to increase awareness among consumers, as well as raise standards for individuals and businesses that were making unauthorized financial promotions.

Only a few months later, in December 2022, the initial set of regulatory changes was enacted, obligating the companies to improve their risk warnings when it comes to investment promotions deemed as highly risky. However, soon after the regulations were set into place, the regulator reviewed 67 crowdfunding and P2P companies, only to discover that around 60% were not regulatory compliant.

In other words, the majority of the companies ignored the new standards, or were unable to comply in time. At the same time, the regulator noticed that the number of inquiries about scams went up, while inquiries regarding investment products went down.

The FCA also recently introduced new, temporary measures that obligated investment firms to offer greater clarity when it comes to their cost disclosures. The idea is to ensure that investors will have as much information as possible when making their investment decisions. The agency also further encouraged companies to include more information into their broader disclosure documents when assessing their obligations under the consumer duty.