The Financial Conduct Authority (FCA) has recognised that the consumer investment market is not operating in a way that provides the best advice to consumers who are often offered unsuitable products. The FCA has drafted a 34 page paper addressing various issues that it judges are being badly handled by the financial sector. The paper highlights some significant failures between the way the sector deals and advises the wealthy long-term consumers as opposed to the consumer who seeks one-off guidance, the FCA states that there is an "unmet need... for straight forward, one-off or focused advice".
Joanna Bailey, an associate in the commercial and financial services litigation department, commented "there is a fast-rising number of investment fraud cases, with scams appearing on social media platforms such as Instagram targeting young people." There are concerns that there is a lack of monitoring and control over Appointed Representatives (AR). The principal has responsibility for ensuring the AR complies with FCA rules and regulations and ultimately is responsible for the AR's breaches. The FCA has turned to the financial industry sector and asked for comment on how the AR regime is viewed and how it is working in practice.
There are also concerns about the growing number of consumers investing without prior advice and the FCA is considering placing more responsibilities and obligations on the organisations that distribute their products via online platforms to ensure that a novice investor will have a clear understanding of both the products and the route to available if something goes wrong.
The number of investment fraud cases continues to rise particularly through the medium of online platforms. Joanna Bailey, who has extensive experience with financial fraud and Forex fraud in particular, commented "since the FCA set up its ScamSmart over one million individuals have visited it; the vast majority of consumers looking for information about Forex and binary options fraud." Joanna further commented, "the economic consequences of the coronavirus pandemic will place enormous financial pressure on everyone and inevitably many people will be drawn to plausible investment scams believing them to be a way to keep themselves afloat financially."
It may be that if the unwitting facilitators of the scams such as search engines and social media sites were obliged to share the liabilities when a consumer falls for a scam, the ease with which the scammers practice their deceptions may significantly alter. If social media platforms are compelled to have an obligation to undertake some measure of due diligence before accepting adverts for financial products on their platform and then having to compensate a consumer who has been deceived through an online platform may result in significantly limiting the opportunities available for scammers.
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