On 7 September 2023, the FCA published a letter to firms setting out its findings from meetings with various cryptoasset firms regarding their preparations for the cryptoasset financial promotions regime, and additional actions it is taking to support firms in complying with the regime. The FCA’s rules on financial promotions for cryptoassets, which were set out in Policy Statement PS23/6 published on 8 June 2023, will have effect from 8 October 2023.
The letter makes the following key points:
- Most firms have faced significant challenges in preparing for the financial promotions regime. The challenges have been concentrated in preparing for the ‘back end’ financial promotion rules i.e. personalised risk warnings, 24-hour cooling off period, client categorisation and appropriateness assessments.
- Firms in global group structures are having to make significant changes to their business models to comply with the regime.
- Firms have under appreciated the broad scope and nature of the financial promotions regime. The regime covers not only ‘traditional’ promotional material but also applies to a wide range of customer communications including websites and apps.
- Firms were not sufficiently considering how certain rules apply to the specifics of the cryptoasset services they provide – in particular, how their risk summaries and appropriateness assessments should be tailored to the specific cryptoassets being promoted.
The good and poor practices observed by the FCA on firms’ preparations for the financial promotions regime are set out in detail on a new webpage also published by the FCA.
Following the feedback received, the FCA announces in the letter the following modification to the financial promotion rules:
- Crypto firms registered with the FCA under the Money Laundering Regulations (MLR) and those firms otherwise authorised by the FCA can apply for a modification by consent to the FCA’s financial promotion rules. This modification is available to MLR-registered firms intending to communicate cryptoasset financial promotions and authorised firms intending to communicate or approve cryptoasset financial promotions.
- The effect of the modification will be to delay the implementation of the ‘back end’ Direct Offer Financial Promotion (DOFP) rules by three months – specifically, rules in COBS 4.10.2AR, COBS 4.12A.15R and COBS 10.1.2R related to personalised risk warnings, 24-hour cooling off period, client categorisation and appropriateness assessments.
- For firms who are granted this modification the rules will not apply from the date the modification is formally consented to. The DOFP rules will enter into force on 8 January 2024 when the modification expires.
- Firms should be aware that the rules related to client categorisation and appropriateness assessments apply to existing customers wishing to engage in further investment activity. Firms who are granted the modification must comply with these rules from 8 January 2024, including for their existing customers.
The FCA notes that all other financial promotion rules will still apply from 8 October 2023.
Further details on the FCA’s modified expectations of firms in relation to the crypto marketing rules are set in a related press release.
We have recently launched CryptoNavigator – a platform which provides a mixture of plug-and-play products and tailored advisory services to help our clients navigate ever expanding regulatory requirements across the cryptoassets landscape. This includes FinProms Plus – a template financial promotions policy, training materials and a one-hour training session from our team. For more information and to sign-up for a demo, please visit CryptoNavigator.