FCA Financial Promotions: High-Risk Investments (COBS 4.12A)
High-Risk Investments [COBS 4.12A]
Rule: Additional restrictions for high-risk investments (speculative illiquid securities, crypto, etc.)
Requirements:
- Personalised risk warnings
- Appropriateness assessment
- Cooling-off period for first-time investors
- Ban on inducements to invest
- Prominent risk warnings
Banned practices:
- Refer-a-friend bonuses
- “New joiner” bonuses
- Incentives linked to investment amount
Source Text
COBS 4.12A.3R A firm must not communicate or approve a direct offer financial promotion relating to a speculative illiquid security, a cryptoasset or a P2P agreement that contains: (1) an offer of a monetary or non-monetary incentive to invest or make a P2P agreement; or (2) an offer of a monetary or non-monetary incentive that is directly linked to the value, amount or frequency of the person’s investment.
COBS 4.12A.5R A firm must ensure that a direct offer financial promotion in relation to a high-risk investment includes a personalised risk warning that the person may lose the money they invest.
Required warning for cryptoassets: “Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong.”