The FCA has tightened its rules on firms’ ability to approve financial promotions for unauthorised persons.

The tightening comes after a number of cases where authorised persons have approved promotions by unauthorised persons, often within the same firm, and problems have occurred.

These cases have resulted in regulatory action by the FCA and losses to consumers who thought they were investing in an authorised promotion.

The rules have been tightened by the FCA as of yesterday (7 Feb). From this date firms now need FCA permission (‘approver permission’) to approve financial promotions under the Financial Services and Markets Act 2000 (FSMA).

This will apply to all cases unless an exemption applies or they applied for approver permission before 7 February and benefit from a transitional regime.

A financial promotion is defined by the FCA as, “an invitation or inducement to engage in investment activity (or claims management activity), that is communicated in the course of business. Financial promotions can take a wide variety of forms, including adverts placed through print, broadcast or online media, marketing brochures, emails, websites or social media posts.” 

The FCA’s Financial Services Register has been updated to provide information about the ability of authorised firms to approve financial promotions for unauthorised persons.

Reporting requirements have also come into force for firms which applied for approver permission before 7 February 2024 and which are benefiting from the transitional regime (see SUP 16.31). For other firms, reporting requirements begin to apply at the point at which they are granted permission to approve financial promotions.

This week the FCA has also published its new rules for people wanting its permission to approve the financial promotions from unauthorised persons.

Details are available here: financial promotions for unauthorised persons.

The Treasury recently made some clarifying changes to the exemptions in Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) (No. 2) Order 2023.

Firms looking to apply for approver permission must ensure they have the competence and expertise to approve promotions of the type(s) being applied for.

The FCA said: “In general, we expect the types of financial promotions that firms intend to approve to align with the investment types in relation to which they have permission to carry on regulated activities. For example, we wouldn't usually expect a firm with only consumer credit permissions to apply for permission to approve financial promotions relating to investments such as shares and debt securities.”

There have been signs that some regulated firms have been getting involved recently in activities outside of their regulatory permissions.