Financial Promotions Gateway goes live – are you impacted?
29 September 2023
The FCA has introduced a new regulatory gateway to provide greater oversight of the approval of financial promotions. Companies that approve financial promotions for third parties will need to consider whether they need to apply to be included in the gateway or whether their activities are exempt.
The Financial Services and Markets Act 2023 (FSMA 2023) amends the Financial Services and Markets Act 2000 (FSMA) by adding a new sub-section 21(2A) and new sections 55NA and 55NB to establish a regulatory gateway through which authorised persons must pass before they can approve the financial promotions of unauthorised persons (financial promotions gateway).
When the financial promotions gateway is introduced, any authorised person seeking to approve the financial promotions of unauthorised persons will first need to obtain the FCA’s permission, unless an exemption to the financial promotions gateway applies. This may have a significant impact on corporate finance, fund distribution and other marketing activities that have previously relied on the approval of financial promotions.
The exemptions are set out in the Financial Services and Markets Act 2000 (Exemptions from Financial Promotion General Requirement) Regulations 2023 (SI 2023/966) (Regulations) (which came into force on 27 September 2023) as follows:
- The authorised person that approves the communication also prepared the content of the communication.
- The unauthorised person prepared the content of the communication and is in the same group as the authorised person that approves the communication.
- The content of the communication is prepared by an appointed representative (that is, the unauthorised person) in relation to any regulated activity for which their principal (that is, the authorised person) has accepted responsibility, where their principal approves that communication.
Where an authorised person does not benefit from one of the exemptions listed above and wishes to continue approving the financial promotions of unauthorised third parties, they should apply to the FCA to do so during the application period (which runs from 6 November 2023 to 6 February 2024). A transition period is then granted which will run from 7 February 2024 until the FCA determines the authorised person’s application. Firms that have applied will be able to continue approving promotions from 7 February 2024 whilst the FCA considers their application (subject to complying with the rules contained in the FCA’s Conduct of Business Sourcebook at COBS 4).
Following review of an application, the FCA may either grant the authorised person permission on the terms sought in the application or impose any other terms that it considers appropriate (for example, the FCA may restrict the authorised firm to approving financial promotions in their field of expertise). In addition, where the FCA grants permission, it may, on the application of the person to whom it was given or of its own initiative, vary or cancel any permission so granted.
The FCA anticipates that, by allowing only those authorised firms that it assesses as suitable and with sufficient expertise to approve the promotions of unauthorised firms, the quality of financial promotions communicated by unauthorised firms will improve.
The FCA has also published a policy statement on introducing a gateway for firms that approve financial promotions in which it sets out its final policy position and responds to the feedback that it received in CP22/27. The FCA’s intention is that firms will be able to submit applications for permission to approve financial promotions from 6 November 2023 until 6 February 2024. On 7 February 2024 the new statutory provisions outlined above will come fully into force and firms that have not applied to the gateway will no longer be able to approve financial promotions (subject to the exemptions outlined above). Companies that are applying to become authorised persons may also apply for permission to approve financial promotions of unauthorised third parties, however they will not be able to benefit from the transition period unless they become authorised and apply on or before 6 February 2024.