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FCA calls for law change for online content as scam reports rocket

The logo of the new Financial Conduct Authority (FCA) is seen at the agency's headquarters in the Canary Wharf business district of London April 1, 2013. The Financial Services Authority (FSA) has been scrapped from April 1 amid reforms to fix a supervisory system criticised for failing to spot the financial crisis coming, forcing Britain to bail out banks. Two new bodies will replace it - the FCA and the Prudential Regulation Authority.  REUTERS/Chris Helgren (BRITAIN - Tags: BUSINESS POLITICS LOGO)

The FCA recommended tighter regulation on sponsored and user-generated content. Photo: REUTERS/Chris Helgren

The UK’s financial regulator has called for the Online Harms Bill to extend its remit to include user-generated content and paid-for advertising, as the number of scams reported year-on-year has ballooned. 

The Financial Conduct Authority (FCA) believes that the bill should designate content relating to fraud offences as “priority” illegal content and so require monitoring and preventative action by platforms.

This would potentially mean social media sites such as Facebook (FB) and Twitter (TWTR) would have to take a more active role in monitoring harmful or misleading content. 

The regulator has also called again for amendments to the Financial Promotions Order. Current exemptions to the order mean more ordinary investors are at risk of receiving financial promotions, including for high-risk products, that don’t have to comply with the FCA’s rules. This could include products such as cryptoassets which have been booming over the course of the past year. 

The regulator publishes an annual Perimeter Report as part of its accountability to parliament and to support regular dialogue with the government on the regulatory regime. The report will form the basis of a formal discussion between FCA CEO Nikhil Rathi and the Economic Secretary to the Treasury before the end of the year, the minutes of which will be published.

In the report the FCA said that from April 2020 to March 2021 consumers reported 30,000 potential scams. This is 77% higher than in the previous 12 months.

Read more: Seven in 10 Brits mistakenly believe cryptocurrencies are regulated by FCA

“We see real risks to consumers from outside our remit from both online advertising and from those using exemptions to sell products to ordinary customers. Change is needed and we will continue to push for powers where we need them,” said Rathi. 

The calls come as the FCA kicks off a campaign designed to help consumers identify the risks investing in cryptocurrencies may pose.

A survey of 1,000 people aged between 18 and 40 who invest in high-risk investment products found that 58% of those investing in high-risk financial products say hype on social media and in the news was behind their investment decisions.

Alongside this, 76% of those aged under 40 who have invested in high-risk products such as cryptocurrency and forex say they were driven by competition with friends, family and acquaintances and their own past investments.

The majority of these crypto investors were also unaware that the FCA does not regulate cryptocurrencies. 

Watch: What are the risks of investing in cryptocurrency?

Read More : FCA calls for law change for online content as scam reports rocket

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