Regulatory Compass: Clear Lines for Influencers, Complexities for Listings
The UK regulatory landscape demands constant attention. Recent actions by the Financial Conduct Authority (FCA) highlight a dual approach: decisive enforcement against social media influencers making unauthorised financial promotions, contrasted with a more nuanced, flexible response to complexities arising from new UK Listing Rules. Flowtly assesses these distinct facets, providing clarity on the FCA's current stance.
Influencer Accountability: The FCA's Unmistakable Stance
The FCA has sent a clear message regarding the promotion of financial products on social media. Seven social media influencers recently faced sentencing at Southwark Crown Court, pleading guilty to issuing unauthorised financial promotions. Their actions were linked to the promotion of a foreign exchange trading scheme involving Contracts For Difference (CFDs) – high-risk derivatives where 80% of retail customers typically lose money.
The individuals involved, with a combined Instagram following of 4.5 million, received fines and were ordered to pay significant costs. For instance, Lauren Goodger was fined £3,750 and ordered to pay £5,778.18 in costs, while others received fines and conditional or absolute discharges.
Steve Smart, Executive Director of Enforcement and Market Oversight at the FCA, stated, "These influencers betrayed the trust of those who followed them." This sentiment underscores the regulator's resolve. Promoting regulated financial products requires appropriate authorisation, and the FCA has published extensive guidance on financial promotions on social media to clarify its expectations for both firms and influencers. Ignorance of the rules, particularly when dealing with high-risk financial products, is not a viable defence. The penalties for communicating unauthorised financial promotions can include fines and up to two years’ imprisonment under the Financial Services and Markets Act 2000.
For more details on these enforcement actions, refer to the FCA's press release. The FCA’s expectations for firms and influencers using social media to communicate financial promotions are outlined in their dedicated guidance.
The Evolving Landscape of UK Listing Rules: Acknowledged Challenges
In contrast to the clear-cut enforcement against influencers, the FCA has demonstrated a more adaptable approach regarding recent changes to the UK Listing Rules (UKLR). The new Public Offers and Admissions to Trading Regulations (POATRs) regime, alongside associated UKLR changes, introduced new requirements for notifying admissions to trading.
Specifically, the Prospectus Regime Manual (PRM 1.6.4R) now mandates issuers to notify a Regulatory Information Service (RIS) of any admission to trading within 60 days. The intent was to streamline transparency for frequent issuers by allowing them to group admissions. However, concerns have arisen due to potentially overlapping requirements in UKLR 6.4.4R(4) and equivalent provisions across other chapters, which demand notification "as soon as possible" for results of new equity issues or public offers.
This overlap has created uncertainty for some issuers, particularly those who previously relied on the exemption for block listings (UKLR 20.6), which was subsequently removed. The FCA has acknowledged that it was not their policy intention to impose additional, duplicative, or more frequent announcement burdens on companies that regularly issue new listed shares.
FCA's Interim Measure: A Pragmatic Pause
Recognising the confusion, the FCA has issued a statement outlining a pragmatic interim solution. While the rules remain formally in force, the regulator will not take supervisory or enforcement action where issuers previously granted a block listing under former UKLR 20.6 do not make notifications under UKLR 6.4.4R(4). This temporary forbearance applies to new issues or public offerings of securities covered by the former block listing that had not been issued or offered before UKLR 20.6 was revoked, and where the securities are used for the same purposes as the original block listing.
The FCA intends to consult shortly on removing UKLR 6.4.4R(4) and equivalent provisions, which would leave issuers solely subject to the 60-day notification requirement in PRM 1.6.4R for admissions to trading. This temporary measure provides a crucial window for market participants to adjust while the regulator addresses the unintended consequences of the new framework.
What This Means for Market Participants
The contrasting scenarios highlight the varied nature of regulatory oversight in GB:
- For Influencers and Promoters:
- The FCA is resolute in prosecuting unauthorised financial promotions.
- Personal liability for individuals is a clear and present risk.
- Any endorsement or promotion of financial products requires rigorous due diligence and, crucially, the necessary regulatory authorisations. Compliance is non-negotiable.
- For Listed Companies and Issuers:
- The regulatory environment is dynamic, and rule changes can introduce unforeseen complexities.
- The FCA has demonstrated a capacity for flexibility and pragmatism in addressing unintended consequences.
- Staying informed about regulatory consultations and forthcoming amendments is essential for navigating evolving compliance requirements, especially regarding admission to trading notifications.
Key Takeaways
- The FCA is actively enforcing against social media influencers promoting unauthorised financial products, holding individuals accountable.
- Promoting regulated financial products without proper authorisation carries significant legal and financial risks.
- Recent changes to UK Listing Rules concerning admission to trading notifications created unintended complexities for issuers.
- The FCA has acknowledged these issues and implemented temporary forbearance, indicating a pragmatic approach to regulatory implementation.
- Market participants, whether individuals or corporations, must remain vigilant and informed about their specific regulatory obligations.
