The UK’s Financial Conduct Authority (FCA) has announced its final position on a new gateway for firms that approve financial promotions. This move is aimed at enhancing consumer protection and improving oversight and accountability in the financial promotion approval process.
The FCA published Policy Statement PS23/13 on September 12, 2023, which outlines the final position on the introduction of this new gateway. This follows from the FCA’s Consultation Paper CP22/27, which was released in December 2022.
Financial promotions in the UK are regulated under section 21 of the Financial Services and Markets Act 2000 (FSMA). This section restricts individuals from communicating invitations or inducements to engage in investment activities, unless they are authorized by the FCA or the Prudential Regulation Authority, or unless the content of the communication has been approved by an authorized person or is covered by an exemption.
Before approving a financial promotion, authorized persons must ensure that it complies with the FCA’s rules and is fair, clear, and not misleading. However, there is currently no requirement for the FCA to receive a copy of the financial promotion.
The new gateway for approval will introduce significant changes to the existing process. The FCA will operate an online approval gateway through which authorized persons can approve financial promotions for communication by unauthorised individuals. This move comes in response to concerns about the quality and accuracy of financial advertisements.
Under the new system, authorized persons wishing to continue approving financial promotions for unauthorised persons will need to apply for permission from the FCA, subject to certain exemptions. They will also be subject to rigorous screening checks to ensure their suitability for the role, including an evaluation of their competence and ability to fulfill their duties effectively.
Authorized persons who only approve their own financial promotions for communication by unauthorised individuals, or who approve financial promotions of their appointed representatives or unauthorised persons within their corporate group, will not be affected by this requirement.
Firms need to evaluate whether they should apply to continue approving financial promotions for unauthorised persons.
Although the new legislation will not come into full force until February 7, 2024, the FCA intends for firms to be able to submit applications for permission to approve financial promotions through the new gateway from November 6, 2023.
Firms that do not apply to the gateway by February 6, 2024, will no longer be able to approve financial promotions, except in cases where exemptions apply.
During the initial application period, which will run from November 6, 2023, to February 6, 2024, firms that apply to the gateway will be able to continue approving financial promotions for unauthorised persons while the FCA reviews their applications.
Firms that do not apply during the initial application period but wish to approve financial promotions in the future will need to apply to the FCA using a variation of permission form. However, they will not be able to approve financial promotions until the FCA has determined their application.
These changes demonstrate the FCA’s commitment to protecting consumers and ensuring high standards in financial promotions. The new gateway for approval will help to strengthen oversight and accountability, ultimately benefiting both consumers and the financial industry as a whole.