Online tech giants like Google should “bear clear legal responsibility” for the promotion of financial products on their platforms, according to the Financial Conduct Authority (FCA), which has called for fraud to be included in the Online Harms legislation.
The coronavirus pandemic has only exacerbated the growing threat to consumers through online promotions of fraudulent or high-risk, unregulated financial products, at a total cost of £4m to savers as of July, according to the Investment Association.
Investor harm caused by unregulated financial promotions has been a growing area of focus of the FCA as a result.
In its second annual regulatory Perimeter Report, the FCA said online platforms, such as search engines and social media platforms, "play an increasingly significant role in communicating financial promotions to consumers", whom are "being more readily exposed to adverts, ranging from scams and promotions of high-risk investments to false or misleading adverts".
The regulator explained that these products fall "either side of the regulatory perimeter", and "directly or indirectly, lead consumers onto paths resulting in harm".
"As the digital world continues to develop, the potential harms to consumers change in both nature and severity," it added.
As a result, the FCA said online platform operators should "bear clear legal liability for the financial promotions they pass on", at least "to the same extent as traditional publishers of financial promotions".
In practice, this would mean an online publisher would have to ensure that any financial promotion appearing on its platform will have been approved by an authorised person "or otherwise falls within the scope of an exemption in the Financial Promotions Order".
The FCA is currently considering with the Treasury the application of the financial promotions regime to these platform operators and whether the regulator needs any new powers.
It said: "We believe there is a strong case to include fraud within the Online Harms legislation, given the FCA's limited power to take down advertising by those seeking to scam people via the internet.
"Without this change in the law, our efforts in this area will not achieve the results that many of our stakeholders expect. For example, we are seeing a large number of adverts online that we think are not appropriate, such as search engine results.
"If we want to have them taken down, we have to convince the online company that the adverts are illegal on a case-by- case basis. In practice, this takes time and can have limited effect as online adverts can re-appear, in a slightly different form, soon after the original advert is removed."