ESMA Eyes Marketing of Financial Products in UE

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The European Securities and Markets Authority (ESMA ), the supervisor and regulator for financial markets in the European Union (EU), announced on Monday the launch of a review of financial products promotion in different EU countries.

According to the press release, in 2023, ESMA wants to work with national competent authorities (NCAs) to confirm that Markets in Financial Instruments Directive (MiFID) II is correctly applied, in terms of marketing financial products in the EU territories.

The NCAs will examine whether the form of promotion and advertising of financial products is “fair, clear and non-misleading” and how companies choose the targeted audience for their marketing content. ESMA wants to emphasize the more complex and risky investment products, most likely including cryptocurrency and contracts for difference (CFDs).

“ESMA is aware of the key role that marketing communications and advertisements can play in determining consumer behaviour and influencing investment decisions and is therefore launching this exercise to assess the application by investment firms and credit institutions of the MiFID II requirements on marketing communications,” ESMA commented.

Check out the FMLS22 session on “Regulation Roundup: Everything you need to know for 2023.”

Online Promotions and Greenwashing

The pan-European financial markets regulator says young investors are now the most vulnerable to potentially overly aggressive marketing strategies. Therefore, NCAs will inspect online and social media promotions, collaborations with influencers, and how mobile financial apps operate.

At the same time, ESMA wants to gather information on possible “greenwashing” practices observed in marketing communications and advertisements. Greenwashing gives consumers the impression that the product or service they are using puts a premium on ecology and green initiatives.

The latest supervisory action comes two weeks after ESMA refreshed its branding, unveiling a new logo and announcing plans to launch a new website.

“ESMA believes this initiative and the related sharing of practices across NCAs, will help ensure consistent implementation and application of EU rules and enhance the protection of investors in line with ESMA’s objectives,” the regulatory watchdog added.

ESMA Follows FCA Footsteps

The steps ESMA took to control the marketing of financial products within the European Union are reminiscent of the activity of the UK’s Financial Conduct Authority (FCA), which implemented several necessary actions to block rogue financial ads and marketing campaigns in 2022.

In November, the FCA announced that it had intervened more than 4,100 times between July and September 2022 to block or change the content of promotions for financial products and services. As the FCA highlighted at the time, some of the most frequent violations involved CFD providers.

Then, in December, the British regulator unveiled new metrics for companies accepting financial promotions to identify better and exclude rogue financial ads. Until now, any FCA-regulated firm could approve promotions on behalf of an unauthorized firm. According to the proposed changes, licensed entities will have to undergo a new assessment to validate that they are correctly approaching the review of promotional campaigns.

The move comes as the number of fraudulent ads has increased dramatically. In the third quarter of 2022, the FCA issued more than 300 warnings regarding fraudulent financial entities and their aggressive marketing tactics.

The European Securities and Markets Authority (ESMA ), the supervisor and regulator for financial markets in the European Union (EU), announced on Monday the launch of a review of financial products promotion in different EU countries.

According to the press release, in 2023, ESMA wants to work with national competent authorities (NCAs) to confirm that Markets in Financial Instruments Directive (MiFID) II is correctly applied, in terms of marketing financial products in the EU territories.

The NCAs will examine whether the form of promotion and advertising of financial products is “fair, clear and non-misleading” and how companies choose the targeted audience for their marketing content. ESMA wants to emphasize the more complex and risky investment products, most likely including cryptocurrency and contracts for difference (CFDs).

“ESMA is aware of the key role that marketing communications and advertisements can play in determining consumer behaviour and influencing investment decisions and is therefore launching this exercise to assess the application by investment firms and credit institutions of the MiFID II requirements on marketing communications,” ESMA commented.

Check out the FMLS22 session on “Regulation Roundup: Everything you need to know for 2023.”

Online Promotions and Greenwashing

The pan-European financial markets regulator says young investors are now the most vulnerable to potentially overly aggressive marketing strategies. Therefore, NCAs will inspect online and social media promotions, collaborations with influencers, and how mobile financial apps operate.

At the same time, ESMA wants to gather information on possible “greenwashing” practices observed in marketing communications and advertisements. Greenwashing gives consumers the impression that the product or service they are using puts a premium on ecology and green initiatives.

The latest supervisory action comes two weeks after ESMA refreshed its branding, unveiling a new logo and announcing plans to launch a new website.

“ESMA believes this initiative and the related sharing of practices across NCAs, will help ensure consistent implementation and application of EU rules and enhance the protection of investors in line with ESMA’s objectives,” the regulatory watchdog added.

ESMA Follows FCA Footsteps

The steps ESMA took to control the marketing of financial products within the European Union are reminiscent of the activity of the UK’s Financial Conduct Authority (FCA), which implemented several necessary actions to block rogue financial ads and marketing campaigns in 2022.

In November, the FCA announced that it had intervened more than 4,100 times between July and September 2022 to block or change the content of promotions for financial products and services. As the FCA highlighted at the time, some of the most frequent violations involved CFD providers.

Then, in December, the British regulator unveiled new metrics for companies accepting financial promotions to identify better and exclude rogue financial ads. Until now, any FCA-regulated firm could approve promotions on behalf of an unauthorized firm. According to the proposed changes, licensed entities will have to undergo a new assessment to validate that they are correctly approaching the review of promotional campaigns.

The move comes as the number of fraudulent ads has increased dramatically. In the third quarter of 2022, the FCA issued more than 300 warnings regarding fraudulent financial entities and their aggressive marketing tactics.

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