UK FCA clarifies expectations on risk warnings for mainstream investments

The UK Financial Conduct Authority (FCA) has published a new webpage clarifying its expectations for firms promoting mainstream investment products and addressing common misconceptions about risk warnings. The FCA states that financial promotions aimed at retail customers must comply with the consumer duty and COBS rules by being fair, clear, and not misleading, and by providing a balanced view of benefits and risks. Regarding common misconceptions, the FCA states that while firms must indicate if capital is at risk, there is no prescribed wording or requirement for risk wording or separate risk warnings. Instead, firms should ensure they include contextualised, prominent risk information that supports consumer understanding without diminishing or obscuring key details within the body of promotion. They must provide a balanced view of the benefits and risks, to give consumers a fair description of the product or service. The FCA has also highlighted that generic or repeated warnings can confuse consumers and encouraged behavioural approaches to improve engagement with risk disclosures.

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