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The evolving UK financial promotion regime: can you keep up?

22 December 2022

The UK financial promotion regime is going through a series of complex and interconnected changes that are being legislated for and implemented in a somewhat piecemeal manner, meaning that it is not straightforward for firms to keep abreast of all the changes or to see the bigger picture.

This is acutely illustrated by the FCA consulting in December on final guidance it published in August but which went out of date before coming into force (due in February)! The impact of the changes will vary depending on the sectors in which firms operate and the products they offer.

Latest developments

Firms approving financial promotions

The FCA published its latest consultation paper on the financial promotion regime, CP22/27, in December 2022. The proposal is that firms which are currently entitled by virtue of their FCA authorisation under the Financial Services and Markets Act 2000 (“FSMA”) to approve financial promotions for unauthorised firms will, in future, have to apply for a specific permission to do so (subject to certain exemptions) (the “gateway”).

Authorised firms approving financial promotions were already required to comply with the financial promotion rules within the FCA Handbook as well as guidance published by the FCA in November 2019. From 1 February 2023, they will also be subject to additional rules concerning approval of individual financial promotions, following rules and non-handbook guidance published in PS22/10 covering matters such as ongoing monitoring, appropriateness assessments for restricted mass market investments, preliminary suitability assessments for non-mass market investments, competence and expertise, and conflicts of interest. (To note though that the non-handbook guidance published in PS22/10 is subject to proposed revisions in CP22/27 to cover the gateway plus the new FCA Consumer Duty).

The latest consultation considers approval of financial promotions more generally, the ability of firms to approve, and related reporting requirements (both in relation to individual financial promotions as well as bi-annual reporting). Permission to approve financial promotions will not be granted on a blanket basis, rather it will be granted in relation to specified sectors and types of promotion. To obtain such permission firms will need to demonstrate that they satisfy a large number of requirements including in relation to record keeping, due diligence, systems and controls, and competence and experience. The investment types for which permission to approve is sought should align with a firm’s Part 4A permissions, if wider approval permission is sought this will attract greater scrutiny by the FCA concerning compliance with applicable requirements.

What other developments are in effect or in progress?

High-risk investments

The FCA had previously put in place various restrictions in relation to certain high-risk investments for retail consumers:

In PS22/10, the FCA published final rules and guidance that aims to rationalise the classification of high-risk investments and strengthen the required steps on the consumer journey into high-risk investments. High-risk investments will be split into two categories – restricted mass market investments (RMMIs) (including non-readily realisable securities (NRRS) and peer-to-peer (P2P) agreements) and non-mass market investments (NMMIs) (including non-mainstream pooled investments (NMPIs) and speculative illiquid securities (SIS)). RMMIs may be mass marketed to retail investors subject to certain restrictions; NMMIs are banned from being mass marketed to retail investors. The package of measures to strengthen the consumer journey includes strengthening risk warnings, banning inducements to invest, introducing positive frictions, improving client categorisation and stronger appropriateness tests.

The main risk warning and risk summary requirements came into effect on 1 December 2022. The remainder of the requirements apply from 1 February 2023.

Buy Now Pay Later (BNPL)

The FCA has reminded firms of the existing scope of the financial promotion regime in relation to BNPL financial promotions (this is the case even though BNPL products themselves are not yet regulated by the FCA).

HM Treasury in its June 2022 consultation response notes that relevant legislation will need to be amended so that all promotions of BNPL and short term interest free credit agreements fall within the financial promotions regime. In practice, this means merchants will be required to obtain approval for promotions of BNPL products from an authorised person (which could, but does not have to, be their BNPL lender partner).

What developments are still to come?

FPO exemptions

The FSMA (Financial Promotion) Order 2005 (FPO) includes a number of exemptions which enable an unauthorised firm to communicate a financial promotion, without the approval of an authorised firm, in certain circumstances and subject to certain conditions. Some commonly used exemptions in the FPO are those enabling promotions to ‘high net worth individuals’ (Article 48 of the FPO), self certified ‘sophisticated’ (Article 50A of the FPO) and certified ‘sophisticated’ (Article 50 of the FPO) investors. The government consulted on changes to these exemptions, in particular concerning financial thresholds and consumers’ ability to self-certify as one of those investor types, in December 2021 but it has not yet published a response.


HM Treasury has indicated that it intends to introduce legislation that will bring the promotions of certain ‘qualifying cryptoassets’ into the financial promotions regime. The final scope of cryptoassets that will be covered by these changes will be determined by the Treasury and set out in the FPO. The FCA has indicated in PS22/10 that, if brought within scope, qualifying cryptoassets will be categorised as RMMIs.


The FCA is proposing within CP22/20 (Sustainability Disclosure Requirements (SDR) and investment labels) a general ‘anti greenwashing’ rule that would apply to all FCA regulated firms. This proposal is intended to affirm existing requirements with a view to ensuring that sustainability-related claims, in the context of naming and marketing financial products, are clear, fair and not misleading. The rule would also require that firms ensure that such claims are consistent with the sustainability profile of the product or service, i.e. proportionate and not exaggerated. Although firms should already be making sure promotions are clear, fair and not misleading under provisions such as FCA Principle 7 and COBS 4.2.1, the FCA considers it necessary to add a specific rule to the Environmental Social and Governance (ESG) Sourcebook to link this standard directly to sustainability claims.

Long-term asset funds (LTAF) – retail distribution

LTAF are currently classed as NMPIs, which under the classification set out in PS22/10 would make them NMMIs. In August 2022 the FCA consulted on broadening retail access to LTAFs by re-classifying them as RMMIs and making them subject to specific risk warning and risk summary requirements. A final policy statement and rules are expected to be published by the FCA in early 2023.

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