Retail investors might be required to pass an online test before they are allowed to invest in certain types of financial products as part of an FCA clampdown on high-risk investments.
The regulator said it was concerned that in a recent survey carried out for it almost half (45%) of respondents did not consider losing money as the potential risk of investment.
Sheldon Mills, Executive Director, Consumers and Competition at the FCA said: “We are concerned that too often consumers are investing in high-risk investments they don’t understand and can lead to significant and unexpected losses.”
The regulator has been slated for its sluggish reaction over mini-bonds, which were sold widely and in cases such as the high-profile collapse of LCF have seen big losses for investors.
Mills said: “We have already taken action by banning the mass-marketing of speculative mini-bonds.
“We continue to address harm in this market through our ongoing supervisory and enforcement action but recognise more needs to be done”
This will involve tighter classification around what are deemed to be high-risk investments and how products such as equity shares and peer-to-peer lending are marketed.
Risk warnings will also be strengthened, though the FCA acknowledged that they are often ignored as ‘white-noise’ by investors, hence a possible requirement at least to watch an educational video or else pass a test to show they understand the product.
Financial promotions through FCA-approved firms by unauthorised people also will be harder with the onus on the regulated firm to monitor them on an ongoing basis.
The FCA said it wants feedback on its proposals by 1 July with a further consultation on possible rule changes later in the year.