News Story: Financial promotion

On 6 March 2024, the Financial Services and Markets Act 2000 (Financial Promotion) (Amendment and Transitional Provision) Order 2024 (and accompanying Explanatory Memorandum) (2024 Order) was published and laid before Parliament, having been made on 5 March 2024. The 2024 Order, which comes into force on 27 March 2024, reverses certain changes to the exemptions in the Financial Promotion Order 2005 for high net worth (HNW) individuals and self-certified sophisticated investors that had been made at the end of 2023 (see FC Feature 19 December 2023).

Background

The FPO 2005 contains a number of exemptions from the financial promotion restriction in s 21 FSMA 2000, including exemptions for communications to HNW individuals (article 48) and self-certified sophisticated investors (article 50A).

HM Treasury consulted on proposed reforms to these exemptions in 2021 (see FC Feature 15 December 2021) and published its response in November 2023 (see FC Feature 8 November 2023), setting out the changes it intended to make to the exemptions.

The changes were implemented through the Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) (No 2) Order 2023 (2023 Order) which came into force on 31 January 2024 (see FC Feature 19 December 2023).

By virtue of the 2024 Order, the government is making further amendments to these exemptions, reflecting 'significant' concerns that have been raised by stakeholders about the potential 'unintended impacts' of the 2023 changes.

Changes to the exemptions

The 2024 Order amends the eligibility criteria for exemptions in the FPO 2005 for HNW individuals and self-certified sophisticated investors while retaining the updated format of the investor statements introduced in the 2023 Order (see Financial promotions, Q&A here). The amendments to the FPO 2005 include those set out below.

• Reducing the financial thresholds to be eligible for the HNW individual exemption – the income and net assets thresholds are being reduced to £100,000 and £250,000 respectively, reinstating the financial thresholds that were in place prior to the 2023 Order coming into force.
• Amending the criteria to be eligible for the self-certified sophisticated investor exemption – a criterion of having made two or more investments in an unlisted company in the previous two years is being added and the level of company turnover required to satisfy the 'company director' criterion is being reduced to £1 million, reinstating the wider criteria that were in place prior to the 2023 Order coming into force.

The changes will be achieved through updating the investor statements that potential investors are required to complete and sign in order to be classified as HNW individuals or self-certified sophisticated investors. Amended investor forms are appended (at Schedules 3 and 4) to the 2024 Order and will replace existing standard forms in Schedule 5 to the FPO.

Transitional provisions

The 2024 Order contains certain transitional provisions, providing that investor statements that comply with the 2023 Order (rather than the standard forms contained in the 2024 Order) will remain valid until 30 January 2025.

FCA statement

On 6 March 2024, the FCA published a Statement in response, indicating that it will continue to work with the government on strengthening the financial promotions regime, while ensuring access to 'sustainable sources of investment' for businesses.

First published on the Corporate News Service on 7 March 2024.

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