AUTH App 3.4 Financial promotion
Guidance on the restrictions on financial promotion under section 21 of the Act (Restrictions on financial promotion) can be found in AUTH App [to be added to the Handbook at a later date]. AUTH App 3.4 gives further guidance on its application to e-money.
As explained in AUTH App [ ], section 21 of the Act applies to the communication of an invitation or inducement to engage in investment activity. Section 21(8) defines engaging in investment activity as:
- (1)
entering or offering to enter into an agreement the making or performance of which by either party constitutes a controlled activity; or
- (2)
exercising any rights conferred by a controlled investment to acquire, dispose of, underwrite or convert a controlled investment.
Controlled activity and controlled investment are both defined by reference to Schedule 1 to the Financial Promotion Order. Issuing e-money is not included as a controlled activity and e-money is not included as a controlled investment.
Accepting deposits is however a controlled activity and a deposit is a controlled investment. As explained in AUTH App 3.2.15 G, the definition of deposit under the Regulated Activities Order says that a sum is not a deposit for the purposes of the Regulated Activities Order if it is immediately exchanged for e-money.
The definition of deposit in the Financial Promotion Order follows the definition of deposit in the Regulated Activities Order. Therefore the purchase price paid for e-money is not a deposit for the purposes of the Financial Promotion Order.
Hence the provisions in the Act and the Handbook about financial promotions do not apply to e-money.
However, if the purchase price for e-money is not immediately exchanged for e-money, the purchase price may be a deposit if the payment comes within the definition of deposit in the Regulated Activities Order. AUTH 2.6.2 G to AUTH 2.6.4 G has guidance on the meaning of deposit. In such a case, the provisions in the Act and the Handbook about financial promotions relating to deposits apply.