The Financial Conduct Authority has urged the government to include duties on internet companies within the Online Safety Bill to protect consumers.
It would see paid-for advertising and user-generated content monitored, and fraud offences regarded as a “priority” within the illegal content framework.
The move stems from the fact that such an action is “beyond its remit”, the regulator warned.
As part of its request, the FCA also urged the government to amend the Financial Promotions Order because current exemptions mean that “more ordinary investors are at risk of receiving financial promotions, including for high-risk products, that don’t have to comply with the FCA’s rules”.
Nikhil Rathi, chief executive of the FCA, said: “The annual perimeter report is an important part of our accountability to parliament, particularly the Treasury committee.
“The FCA is committed to being more innovative, assertive and adaptive. That means being more proactive at the limits of our regulation, working with partners and other agencies where we don’t have powers and setting out where we believe more powers are necessary.
“We see real risks to consumers from outside our remit from both online advertising and from those using exemptions to sell products to ordinary customers.
“Change is needed, and we will continue to push for powers where we need them.”
While the move is certainly welcome, some of the London Capital & Finance (LCF) bondholders believe it may have come “too late”.
They told International Adviser: “Personally, I think [the FCA] has bowed to the pressure from [personal finance campaigner] Martin Lewis in Parliament this week.
“He is the most influential and powerful advocate for consumer safety and made an incredible case – an emotional one.
“Why has it taken so long with such an intense fight from campaign groups like ours and Gina Miller to finally force the FCA to put their weight behind it?
“The Serious Fraud Office (SFO), National Crime Agency (NCA), and National Economic Crime Centre (NECC) are powerless to prevent and handle fraud as evidenced continually, so working with these groups will see no improvement in the fraud epidemic.
“The SFO has achieved little on the LCF fraud since 2019.”
Another bondholder told IA there are two issues with the regulator’s latest move.
“First, it is a positive step to see the proposed changes but it is too little, too late. We need a proactive and not reactive regulator who has only issued this statement as a knee-jerk reaction because of public and celebrity outcry for help.
“Second, the FCA is not fit for purpose and despite promises of reform, it continues to remain unchanged. The Gloster report was verbally acknowledged but the FCA has not embraced the recommendations or done anything to address the change.
“Instead, it tried to hide behind an unfair and shoddy made up complaints policy to shrink responsibility. The Complaints Commissioner has had to step in and I am sure her findings will reveal more true colours,” they added.
Next move ‘in government’s hands’
Laura Suter, head of personal finance at AJ Bell, said: “The FCA has firmly pointed the finger at social media sites, such as Facebook, Twitter and Instagram, as needing to do more to stop the rise in fraud. It’s calling on the government to force these internet giants to do more to protect savers from online scams, including monitoring posts.
“Online scammers have come alive during covid, preying on the fact that we were all spending more time on the internet. The FCA has seen a 77% increase in scams reported to it between April 2020 to March 2021 when compared to the previous 12 months.
“A total of £4m ($5.5m, €4.7m) a day was stolen through fraud in the first half of this year, an increase of almost a third, and clearly that will help make politicians and regulators sit up and do more to solve the problem.
“Google has already announced a plan to help shut down the number of scammers who pay for ads so their results will appear high up in search rankings, in order to ensnare a large number of savers. But now the FCA has set its sights on the social media platforms that serve as a gateway to fraudsters and allow them to spread their fraud quickly and with ease.
“The issue with social media sites is that scammers can very cheaply and easily spread their messages to thousands of people and once the posts are live it’s hard to control them.
“The next move is firmly in the government’s hands, with the FCA highlighting where it thinks the regulation is failing and that it is powerless to fix it as its jurisdiction doesn’t extend to regulating these websites and posts.”