The Financial Conduct Authority (FCA) is rolling out a heap of new measures to “move the dial on risk” among Britons as it bids to lead on the charge to boost retail investment, including through allowing them to remove legal jargon that confuses consumers.
In a suite of consultations unveiled on Monday, the City regulator said it wanted to help consumers make better-informed decisions about investing in stocks and shares.
It also laid out plans to allow firms to make investments more accessible and “engaging” for Britons, with consultations to draw views and opinions from consumer groups and investment firms.
They come just a few months before City giants are expected to launch a nationwide advertising campaign to get Britons to put more savings in stocks and shares ISAs, with a cut to the cash ISA limit being a part of a wider push to back UK-listed companies.
The government has also pushed to boost capital markets in the country, offering newly-listed companies a three-year holiday from stamp duty on shares.
The first set of changes will come in the form of how the City regulator distinguishes retail investors from professional traders.
Its consultation paper said new proposals aimed at strengthening clarifications beyond a “tick-box approach” would allow platforms to offer a “more diverse range of products” for clients looking to bear greater risks with complex investments.
Changed assessments of investors and a new route for wealthy individuals with at least £10m in assets to opt out of retail protections will improve overall consumer protection and boost growth, the FCA argued.
FCA to prevent ‘gamification’ among platforms
The next part of reforms involves consolidating information provided to consumers under the Consumer Duty, a set of regulations for financial services firms to protect retail investors, bank users and other Britons.
Red tape on templating and documentation will be “stripped away” and allow firms to be more creative in how they can attract Britons to retail investing.
The move would allow companies offering investment products to “eradicate jargon” and allow consumers to see more simple information.
It would mean that some types of legal disclosures in “rigidly prescribed document templates” could be wiped out and replaced with more “consumer-centric” communications.
Warnings about the risks of investment may also become more “tailored” while the FCA could also allow firms to provide greater promotion of possible returns to be made.
But FCA documents also said that they wanted to avoid platforms from including “elements of gamification which could be harmful”, such as through including trader leaderboards or push notifications.
Simon Walls, executive director of markets at the FCA, said the new measures would “support investment risk culture” among both retail and professional users.
“They ensure that firms can compete to give retail customers material that informs and engages them,” he said.
“They also draw a brighter line for professional markets, defined by contracting parties, informed consent and regulation that is proportionate to that.”
Jonathan Parry, a partner in the capital markets division of law firm White & Case, said: “Fostering a stronger investment culture in Britain and boosting retail investor participation in the stock market will strengthen London’s competitiveness by increasing liquidity, improving access to capital for companies and bringing the UK more in line with other jurisdictions such as the US and Nordics, which benefit greatly from strong cultures of retail investing.”