Understanding what constitutes a financial promotion is essential for marketers in the financial services industry. For firms under the UK’s regulatory framework, compliance with the Financial Conduct Authority (FCA) rules is key to doing business in the UK market.
Read on to learn more about what qualifies as a financial promotion, and for practical tips on how to maintain compliance while marketing financial products to your audience.
Understanding the FCA’s Definition of Financial Promotion
The FCA defines a financial promotion as "an invitation or inducement to engage in investment activity, communicated in the course of business" (FCA Handbook). Fundamentally, this means any communication designed to encourage someone to invest or participate in a financial product or service.
Key elements of the definition include the following:
"Invitation": Explicitly inviting someone to invest, e.g., “Apply now for shares in our growing company.”
"Inducement": Communications with persuasive or promotional elements, e.g., “Our portfolio delivers industry-leading returns.”
"Investment Activity": Broadly covers dealings in products like shares, debt instruments, or financial arrangements.
"Course of Business": Communications with a commercial interest, i.e., statements made in the course of doing business (including, for example, sales conversations).
It’s important to assess all communications against this definition, as even a seemingly harmless statement could cross the threshold into a regulated financial promotion during fundraising or marketing activities.
Forms of Financial Promotions
Financial promotions manifest in multiple forms, which means marketers must tread carefully across diverse channels. Below are some examples of materials that can constitute financial promotions:
Website Content: Example, “Sign up now for guaranteed annual returns.”
Social Media Posts: E.g. TikToks, Tweets, or LinkedIn updates that invite investment.
Pitch Decks or Online Videos: Anything promoting an investment opportunity.
Emails: Direct communications highlighting investment benefits.
Event Presentations: Public pitches that describe investment opportunities.
Sales Conversations: Statements made during sales calls describing investment opportunities.
A financial promotion isn’t limited by format. A casual LinkedIn post or a professional brochure could both fall within the FCA’s remit if they invite or induce investment activity.
The General Prohibition on Financial Promotions
Under the UK’s regulatory framework, the communication of financial promotions is not allowed unless they meet one of the following criteria:
Issued or Approved by an FCA-Authorized Firm: Approved communications, often referred to as “Section 21 approvals” (from the Financial Services and Markets Act 2000), can be widely disseminated.
Permitted by Exemption: Exemptions apply in specific contexts, such as communications to certain categories of investors, discussed further below.
Non-compliance can lead to significant legal and financial consequences, making it crucial for marketers and compliance officers to carefully assess whether their communications meet the FCA and UK Financial Promotion Order (2005) requirements.
Common Exemptions to the General Prohibition
Exemptions exist to facilitate fundraising and communication in specific scenarios. Below are some commonly applied exemptions:
High Net Worth Individuals (HNWI)
Communications to HNWIs are exempt as long as the recipient meets the following criteria under FCA rules:
An annual income of at least £100,000, or
Net assets exceeding £250,000 (excluding primary residence, pensions, and insurance).
You must also include signed statements confirming the recipient qualifies as a HNWI within the last 12 months.
Sophisticated Investors (SI)
Sophisticated investors can also receive financial promotions, provided they meet one of the following:
Have made two or more investments in unlisted companies within the past two years.
Have been a company director of a business with £1 million turnover in the last two years.
Like with HNWIs, a valid investor statement is required.
Investment Professionals
Communications exclusively targeting investment professionals are exempt, provided the recipient holds professional expertise in investments. This category covers fund managers, venture capital professionals, or FCA-authorized firms. These communications must clearly state that they are solely intended for investment professionals.
Each exemption has specific wording, risk warnings, and compliance stipulations, so review all materials carefully before using them.
Risk Warnings and Disclaimers
Under the Financial Promotion Order 2005, certain disclaimers and information must accompany financial promotions, including:
Risk Warnings: A clear disclaimer highlighting the risks of loss in investments, appropriate for the specific category of product you are promoting.
Explanatory Notes: Disclosures clarifying who the promotion is targeted at, along with mention of relevant exemptions.
Firm Contact Details: Include your firm's name, address, registration number, and contact information.
These elements ensure transparency and enable your audience to make informed investment decisions.
Why Compliance Matters for Financial Marketers
Non-compliance can result in significant penalties, reputational damage, and even legal proceedings. Beyond these risks, adhering to FCA regulations also demonstrates accountability to your stakeholders and promotes trust among investors.
Key benefits of compliance include the following:
Avoidance of hefty fines or legal action.
Clear and transparent communication ensures ethical fundraising practices.
Alignment with best practices positively influences brand reputation.
Take the Next Step Toward FinProm Compliance
Understanding and adhering to rules regulating financial promotions is non-negotiable for businesses engaged in investment marketing. For marketers in financial services, compliance with FCA regulations not only safeguards your organization but also builds trust and bolsters your brand reputation.
If you’d like further guidance navigating FCA compliance for your marketing strategy, get a personalized demo of our finprom compliance platform. Our experts are here to help you ensure your communications remain clear, credible, and fully compliant with UK regulations.
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