Changes to FCA financial promotion regime: What you need to know

Now that the FCA has published its policy statement, Jeanette and Andrew take a look at what’s changed between the proposals and the final rules, and the next steps for firms.

Proposed changes to the FCA financial promotion regime – a brief reminder

As we explained in our earlier briefing, the FCA consulted on the following:

• Introducing two new categories to the classification of high risk investments: ‘Restricted Mass Market Investments’ and ‘Non-Mass Market Investments’.

• Strengthening the consumer journey by: improving risk warnings (standard risk warning and risk summary); banning inducements to invest; adding positive frictions (personalised risk warning pop ups and a 24 hour cooling off period for first time investors); making changes to investor declarations to help consumers better categorise themselves; strengthening the appropriateness tests; and introducing recordkeeping requirements.

• Strengthening the role of firms approving and communicating financial promotions.

Who is affected?

The FCA says that the changes will be directly relevant to section 21 approvers (authorised firms which approve financial promotions for unauthorised persons), regardless of whether the investments are high risk; issuers of non-mainstream pooled investments, speculative illiquid securities and non-readily realisable securities ; investment-based crowdfunding platforms and other intermediaries distributing high risk investments to consumers ; loan based peer-to-peer platforms; and trade bodies for these last two sectors.

What’s changed in the final rules?

A key change is the implementation period. The rules were originally planned to come into force on 1 December 2022. Now, only the main risk warning rules (standard risk warning and risk summary, but not the personalised risk warning) will come into force on that date. The rest will come into force two months later, on 1 February 2023, giving firms some additional time to prepare.

The FCA has made several targeted changes to its proposals in response to stakeholder feedback. These changes are helpfully set out in Table 1 starting on page 8 of the policy statement.

The FCA has decided to allow alternative risk warnings in some circumstances. These are summarised in Figure 4 on page 20.

What about cryptoassets?

The FCA will publish final rules for cryptoasset promotions once the Treasury has made the relevant legislation to bring qualifying cryptoassets in scope of the financial promotion regime.

FCA financial promotion regime – next steps and how we can help

Affected firms should familiarise themselves with the new rules and make sure they have the processes in place to comply in time.

If you have any queries about the changes and how they will affect you, or need advice or assistance with implementing them in your business, please contact Jeanette or Andrew, who will be very happy to help.