Financial promotion after N2

One of the Government’s aims in modernising the regulation of financial services is to ensure that the UK system is best-placed to reflect the opportunities of new and rapidly evolving communications technology. This aim can be seen in the new financial promotions regime. This regime will replace the current regimes that apply to investment advertisements and cold calling once the Financial Services and Markets Act 2000 (FSMA) comes into force. It reflects the fact that new technology, particularly the Internet, has blurred the boundary between advertisements and unsolicited calls. In this article Ben Blackett-Ord of Bovill Gunn examines the present proposals for financial promotions.

Ben Blackett-Ord is a non-practising barrister and a director of Bovill Gunn, the financial services regulatory consultancy. He can be reached on ben@bovillgunn.com .

The starting point is clause 21 of the FSMA which has the effect of prohibiting financial promotions unless they are communicated or approved by an authorised person. In order for a communication to constitute a financial promotion it must constitute an invitation or inducement. A purely factual communication in which the facts are presented in such a way that they do not also amount to an invitation or inducement is a not a financial promotion in terms of the Act.The communication must also be made in the course of business and the prohibition does not therefore apply to essentially private communications. The important point to note is that the concept of a financial promotion is media neutral. That is to say it covers verbal, written and electronic communication. Breach of section 21 is an offence punishable by a maximum of two years imprisonment.