PERG 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 PERG 8. PERG 3.4 gives further guidance on its application to e-money.
As explained in PERG 8, 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 PERG 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. PERG 2.6.2 G to PERG 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.