MP’s met again last week as part of the Joint Committee looking at the proposed Online Safety Bill, to look at the impact of online fraud. Unfortunately, it looks like they couldn’t agree on the best way to control the situation.
There have been calls for financial adverts to be included in the scope of the Online Safety Bill, but the government doesn’t think that this is the right mechanism. It would prefer the FCA to deal with enforcement, which already exists because “financial promotions” are a regulated activity. That’s all well and good, but the FCA’s argument is that the companies offering unauthorised financial promotions are operating offshore outside its reach but using social media platforms to distribute what are effectively illegal promotions. The FCA wants the ability to control the social media platforms and make them accountable for the advertising that they allow to be published. This is where there appears to be an impasse, in terms of working out how this can be achieved through existing regulations and controls.
It’s fair to say that some of the social media platforms (particularly Google) have tried to implement controls by checking whether advertisers are regulated by the FCA. But this is being done on a voluntary basis and its not clear that the FCA of even the government have any real powers to act if these measures aren’t properly applied.
The issue of online financial promotions is potentially more widespread because the FCA wants to include advertising for crypto currency, even though they are currently unregulated.
There is certainly a will to create some better controls, unfortunately it seems the “way” is still unclear. In the meantime, the misleading and fraudulent adverts continue to surface every day putting customers at risk.
The FCA is being proactive in other areas, however. It has announced the launch of a new Invest Smart initiative designed to provide education about high-risk investments. This comes on the back of research showing that over one million new investors have come into the market since the pandemic, but that many have put their money into” high risk” investments, particularly crypto investments. The new activity seems to be being driven by the pursuit of high returns, mostly driven by the advertising the FCA is already looking to control.
In a recent survey of 18- to 40-year-olds almost three quarters said that they thought investing was like gambling and their ambitions were for short term gains rather than long term growth. It seems there was little understanding of the risks.
Invest Smart will be targeted across social media platforms to try to provide a balanced view against the online adverts.
Google has now volunteered $3 million worth of “free” advertising credits to the FCA to support the campaign. That may or may not have something to do with Facebooks recent bad press and Google’s request to appear at the Treasury Select Committee again. The unanswered question is how much Google have made from paid advertising for “unregulated” financial promotions. No one would be surprised if the offer of £2.2m in credits was a drop in the ocean.