FCA: New Financial Promotion Gateway

The position that has been in force under the Financial Services & Markets Act 2000 and predecessor legislation was that a financial promotion could be issued by an unregulated person subject to the approval of its content by a firm authorised and regulated by FCA. The upshot of this wide provision has been that firms with no real experience or expertise in relation to the investment product or service being promoted were called upon to approve content, for a fee, and that as a result promotional material was entering the market and being placed before investors unsuited to the products or services concerned, thus generating significant consumer risk.

As the culmination of this consultation process, FCA is introducing a new “gateway” for the approval of financial promotions. For existing authorised firms who wish to continue offering this service of approving the content of financial promotions, the window for applications to FCA for formal permission to do so opens on 6 November 2023 and runs to 6 February 2024. Firms who do not apply by this time will lose the right to approve the content of financial promotions (other than in one or two narrow circumstances). New applicants for Part 4A permissions in the future will be entitled to apply for permission to approve promotions. It is not clear what sort of criteria FCA will be applying to such applicants in the future.

This change was introduced in the Financial Services and Markets Act 2023, which amended section 21 of the Financial Services and Markets Act 2000 which created a regulatory gateway for all authorised persons that want to approve the content of financial promotions. The FCA sets out its own near-final rules and final policy position in relation to the management of this gateway, in PS23/13.

Those that fail to apply within the application timeframe will no longer be able to approve the content of third-party financial promotions from 7 February 2024. Those that have applied but not yet had a response from the FCA can continue to approve financial promotions during this transitional period unless and until the FCA determines otherwise. The statutory deadline for approving applications is 6 months for a complete application and 12 for an incomplete application: these are the same timing criteria as apply to the consideration of a Part 4A application for authorisation.

EEA Firms that are currently in the temporary permissions regime (which comes to an end on 31 December 2023) are advised that they cannot apply for permission to approve financial promotions unless they are subsequently granted Part 4A permission, at which point they can apply for approver permission by seeking a Variation of Permission.

Gibraltar-based firms who are exercising passport rights in the UK may apply for the permission to approve financial promotions in the same way as UK authorised firms.

One very important area of impact will be in relation to the use that is being made by unregulated persons of materials that have been approved as financial promotions under the present relatively laissez-faire regime of the unamended s 21. Any person that is purveying a financial promotion that has been treated in this fashion is strongly recommended to suppress it and withdraw all relevant materials from circulation.

For more information on this topic, please reach out to Alexandra Heron or Daniel Tunkel.