The Financial Conduct Authority’s new regulatory gateway for approval of financial promotions

UK FCA Policy Statement PS23/13 sets out a new regime for the approval of financial promotions made by unauthorised persons.  Those authorised to carry out the new regulated activity of approving financial promotions will be permitted to approve a limited range of financial promotions

Why should I read this?

Financial Conduct Authority (FCA) Policy Statement PS23/13, “Introducing a gateway for firms who approve financial promotions” provides that from 7 February 2024 FCA authorisation (approver permission) will be required by all authorised persons approving financial promotions for unauthorised persons.  Approver permission will be limited to specified types of financial promotion and will not be a blanket permission to approve any kind of financial promotion.

Firms seeking authorisation to approve particular kinds of financial promotions must demonstrate the necessary skills and expertise to do so.  Firms authorised to approve financial promotions will be expected to assess whether a promotion of a financial product fairly represents the product being promoted in a way that is not misleading, which will require the authorised person to establish whether the promoted product is commercially feasible and reasonably capable of achieving what is being promoted.  The authorised firm must also consider its Consumer Duty obligations when approving financial promotions.

The FCA is particularly concerned that, under the current regime, financial promotions offering unrealistic rates of return have been approved, causing significant harm to consumers.

The gateway is intended to improve the quality of financial promotions that are approved but, at the same time, the number of firms providing approval for financial promotions will fall and there will be less competition in the market.

Who does this apply to?

Authorised persons who approve, or intend to approve, financial promotions for unauthorised persons.

Currently any authorised person can approve any kind of financial promotion made by an unauthorised firm, even if that authorised person has no expertise in the type of regulated activity to which the financial promotion relates.

Those authorised firms currently approving financial promotions that wish to continue to do so should commence preparation to apply for authorisation as approvers of financial promotions as soon as possible.

What do I need to do if I want to continue to approve financial promotions for unauthorised persons?

Firms have a three month window between 6 November 2023 and 6 February 2024 to apply for approver permission.

Firms which have submitted an application can continue to approve promotions after 7 February 2024 until they receive a decision on their application.  

The application forms can be accessed via FCA Connect (for authorised firms) or the FCA webpage “Applying to approve financial promotions for unauthorised persons”.

What else do I need to know about the new FCA financial promotions gateway?

Exceptions

The following activities are excepted from the new gateway:

• An authorised person approving their own financial promotions for communication by an unauthorised person
• An authorised person approving their appointed representatives’ (ARs) financial promotions
• An authorised person approving the financial promotions of unauthorised persons within their corporate group 

Financial promotions approved under the old rules grandfathered

Unauthorised persons will be permitted to continue to communicate financial promotions approved before the gateway comes into force, provided the promotion remains unchanged and continues to comply with the FCA rules.

Reporting

Authorised firms with approver permission will need to make detailed reports to the FCA twice a year.

Crypto assets

Approval of financial promotions in relation to crypto assets are subject to a new regime that will come into force on 8 October 2023.

The new gateway is likely to have a disproportionate impact on financial promotions for crypto assets.  Currently financial services related to crypto assets are in the process of being brought within the regulatory perimeter.  A provision of the recent Financial Services and Markets Act 2023 provides for the regulation of financial services relating to crypto assets.  Those firms aspiring to become authorised for financial services relating to crypto assets may well be wary of applying for authorisation to approve financial promotions relating to crypto assets until they have obtained authorisation for their principal business.

Further reading on financial promotions

See our previous client briefing:

• UK’s FCA writes to cryptoasset firms marketing to UK consumers about new financial promotion rules

How Eversheds Sutherland can help

Firms approving financial promotions relating to high-risk investments should consider how to implement the stricter disclosure requirements set out by the FCA. Although firms marketing cryptoassets are not currently affected, they should remain alert to the proposed rules on cryptoasset promotions. Please visit our Crypto hub for more information.

For further information on this matter, please contact: