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What Platforms want to say

With interest rates on traditional savings products still so low, it’s no surprise direct investment (or crowdfunding) platforms are often keen to highlight the potentially high interest rates that can be offered by their products. This, in turn often leads to comparisons being made between the products being offered on their platform, versus the more traditional banking products such as savings accounts.

The Rules

FCA guidance tells us that if the financial promotion compares relevant business, relevant investments or persons who carry on relevant business (COBS 4.5.6), we must make sure that:

  • Any comparisons are meaningful and presented in a fair and balanced way.
  • The sources of the information used for the comparison are specified, as well as including the key facts and assumptions used to make the comparison.
  • The information contained in the financial promotion should also be consistent with any other FCA guidance that is in relation to the products being offered.

Now what this would mean for those wishing to make these sorts of comparisons, is that it will not be possible to compare the potential returns of an investment made on a crowdfunding platform with those on an interest-bearing savings account, without ensuring that the two very different risk profiles are explained. 

In Practice

For example, investing in the products listed on a crowdfunding platform are illiquid; investment losses will not be covered by the Financial Services Compensation Scheme (FSCS);  your Capital is at risk and returns are not guaranteed.  Whereas with savings accounts, or other banking products you can often have instant access to your funds, you know the level of return you will receive and FSCS cover is available giving the account holder a level of protection even if the account provider was to cease trading. As a result, these products have a completely different risk profile and the same risks will not always be applicable.

As part of our umbrella authorisation services here at ShareIn, we assist our Appointed Representative clients in preparing content for their websites, offer documents, and other financial promotions which would meet FCA standards on being fair, clear, and not misleading. We always strive to adhere to both the letter and the spirit of FCA guidance, and with that in mind we will be paying special attention to the sorts of comparisons noted above. 

The key takeaway message here is – yes, you can make comparisons about the investments on a direct investment or crowdfunding platform, as long as your messaging is presented in a fair and balanced way!

If you’d like to find out more about having your own investment platform whether you’re new to regulation or you’re already authorised please feel free to get in touch and speak to one of our experts.

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