Home / Financial Promotion Order Update
26th March 2024
Trainee Solicitor, Tyler Ross explains the changes made to the Financial Promotion Order, due to come into force 27th March 2024.
In January 2024, the Government implemented changes to the financial promotion exemptions contained in the Financial Promotion Order relating to high-net-worth individuals (HNWs) and sophisticated investors. However, just two months on, the Government has decided to partially retract these changes and reimplement the previous eligibility criteria which are set to come into force on 27 March 2024.
Section 21 of the Financial Services and Markets Act 2000 (FSMA) places restrictions on an unauthorised person communicating financial promotions without first being approved by an authorised person. A “financial promotion” is a communication that contains an invitation or an inducement to engage in a financial product or service and includes an offer to buy shares in a company. A wide range of communications are covered, including advertising, broadcasts, emails, websites, and social media posts. It is therefore extremely important to consider whether any messages or online posts relate to an investment activity, given that a breach is a criminal offence.
The overall purpose of these restrictions is to prevent high levels of engagement with risky investments. However, the Government must carry out a balancing act between investor protection and market development. The exemptions aim to achieve this, as they disapply the financial promotion restrictions to HNWs who have a certain amount of annual income and net assets. The exemptions also apply to sophisticated investors who meet certain criteria. The Government recognise that these groups of people are an important source of finance of SMEs and as such have decided to reduce the thresholds to the previous levels to allow a larger pool of investors to be exempt from financial promotions.
For a financial promotion to be communicated to a HNWI, as of 27 March 2024 that HNW must either:
The criteria to communicate a financial promotion to a sophisticated investor as of 27 March 2024 will be as follows:
Any financial promotion communicated to a HNW or a sophisticated investor under one of the exemptions must be accompanied by a self-certification by the recipient of the promotion that they meet the criteria. It is important to note that any investor statement signed before 26 March 2024 will remain valid until and including 30 January 2025. However, any statement signed after the 26 March 2024 will need to be issued in its latest form and include the reinstated thresholds.
If you have any questions in respect of the proposed changes outlined above or would like assistance in making a financial promotion, you can speak to a member of our expert Corporate team. Please contact us on 0161 832 3434.