UK Risk Warnings Review final report published

The final report from the Risk Warnings Review was published. The report was commissioned by HM Treasury as part of the Leeds Reforms and sets out recommendations to improve the communication of investment risk to retail consumers.

The report advises moving away from the widespread use of standardised risk warnings which may be misunderstood by less experienced investors and disregarded by more experienced investors. Instead, it recommends rebalancing risk communications towards clearer, more contextual explanations of how investments can rise and fall, presented alongside potential benefits and relevant time horizons, which are seen as more likely to encourage positive actions.

Key recommendations include:

• Amending the UK financial promotion rules to support clearer, more contextual explanations of how investment risk works in practice.
• Reforming the standalone compliance principle to enable plain language explanations of risk and reward, rather than formulaic repetition, and to better align supervisory practice with outcomes based regulation.
• Ensuring that the impact of current guidance and any future reforms are reinforced through consistent application across supervision, enforcement and dispute resolution, including closer alignment between regulatory and enforcement policy and expectations.
• Encouraging ongoing collaboration between industry and regulators to ensure effective risk communication.

Practical guidance was published alongside the report, setting out steps firms can take now to improve communications on investment risk.

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