The Financial Conduct Authority (FCA) has said it is considering expanding the classification of high-risk investments to include more types of investments which should be subject to marketing restrictions in its proposals to strengthen financial promotion rules.

The regulator has published proposals to strengthen its financial promotion rules for high-risk investments to "help retail investors make effective decisions".

The discussion paper has been published the same week the Financial Services Conduct Authority warned that retirees are being tempted to put money into investment products claiming to offer high returns due to the prolonged low interest savings environment. 

In its discussion paper, the FCA is seeking views on whether more types of investments such as equity shares should be classified as high-risk investments, how it can further segment the high-risk investment market and what risk warnings they should have attached, and whether there should be more requirements to monitor financial promotions on an ongoing basis.

The regulator has requested feedback by 1 July. The full discussion paper can be read and responses submitted on the FCA website. 

The feedback to the proposals will help shape rules that regulator will consult on later this year.

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.

“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. Our latest proposals would further reduce the risk of people taking on inappropriate, high-risk investments that don’t meet their needs.”

In the first quarter of 2021, the FCA reviewed 411 financial promotions which were identified by a combination of external complaints and its own reviews. 

Some 38 cases resulted in a total of 105 promotions being amended or withdrawn.

Three quarters of the 105 promotions that were amended or withdrawn related to either website or social media promotions.

Retail investments constituted 26% of the 105 promotions found to be non-compliant.

The FCA decided to permanently ban the mass-marketing of speculative illiquid securities, including speculative mini-bonds, to retail investors in June 2020.

The announcement came just a month after the Financial Services Compensation Scheme (FSCS) blamed potential claims from the London Capital & Finance (LCF) mini-bond scandal for an additional £44m cost in its £649m 2020/21 budget.

A total of 11,600 investors were hit by the £236m collapse of LCF which has resulted in a wave of complaints, claims and litigation, with some accusing the FSCS and the FCA of dragging their feet.

The FCA originally introduced a ban on the mass-marketing of speculative illiquid securities without consultation in January 2020.

The FCA will publish a full response to its CFI on consumer investments, alongside the next steps on its wider consumer investments strategy, later in the year.