PERG 8.2 Introduction

1. (1)

   6The effect of section 21 of the Act (Restrictions on financial promotion) is that in the course of business, an unauthorised person must not communicate an invitation or inducement to engage in investment activity or to engage in claims management activity3 unless either the content of the communication is approved for the purposes of section 21 by an authorised person or it is exempt.

2. (2)

   6By virtue of section 21(2A) of the Act7 an authorised person is unable to approve the content of a communication for the purposes of section 21 of the Act unless:

   1. (a)

      the firm is a permitted approver in relation to the financial promotion; or

   2. (b)

      an approver permission exemption applies.

3. (3)

   References7 in this chapter to financial promotions being approved by an authorised person should be read as referring to approval by an authorised person who is either a permitted approver in relation to that financial promotion or where the approval falls within the scope of an approver permission exemption.

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4. (4)

   6 Under section 25 of the Act (Contravention of section 21), a person commits a criminal offence if they carry 6on activities in breach of the restriction in section 21 of the Act. A person who commits this criminal offence is subject to a maximum of two years imprisonment and an unlimited fine. However, it is a defence for a person to show that they 6took all reasonable precautions and used all due diligence to avoid committing the offence.

Another consequence of a breach of section 21 of the Act is that certain agreements could be unenforceable (see section 30 of the Act (Enforceability of agreements resulting from unlawful communications)). This applies to agreements entered into by a person as a customer as a consequence of a communication made in breach of section 21.

An authorised person will not breach section 21 when communicating a financial promotion. Nevertheless, this guidance may be relevant where an authorised person needs to know whether the financial promotion rules apply1 to a particular communication.

A person who is concerned to know whether his communications will require approval or, if he is an authorised person, whether the appropriate financial promotion rules1 will apply to his communications will need to consider the following:

1. (1)

   am I making a communication or causing a communication to be made? (see PERG 8.6);

2. (2)

   if so, is it an invitation or inducement? (see PERG 8.4);

3. (3)

   if so, does the invitation or inducement relate to a controlled investment? (see PERG 8.7);

4. (4)

   if so, is the invitation or inducement to engage in investment activity? (see PERG 8.7);

5. (4A)

   alternatively, is the invitation or inducement to engage in claims management activity? (see PERG 8.7A);3

6. (5)

   if so, is it made in the course of business? (see PERG 8.5);

7. (6)

   if so, and the financial promotion originates outside the United Kingdom, is it capable of having an effect in the United Kingdom? (see PERG 8.8);

8. (7)

   if so, or if the answer to (5) is yes and the financial promotion was made in the United Kingdom, is the promotion exempt? (see PERG 8.12 to PERG 8.15 and PERG 8.21);

9. (8)

   if not, am I an authorised person?

1. (1)

   6If the answer to PERG 8.2.4G (8) is yes, then the appropriate financial promotion rules1 will potentially 2apply (subject to the relevant 6application provisions)6.

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2. (2)

   6If the answer to PERG 8.2.4G(8) 6 is no, then the promotion must be approved by an authorised person if it is a non-real time financial promotion. Authorised persons are not allowed to approve:6

   1. (a)

      6financial promotions other than within the scope of:

      1. (i)

         approver permission given by the FCA under section 55NA of the Act; or

      2. (ii)

         an approver permission exemption (see PERG 8.9.1AG);

   2. (b)

      6real time financial promotions (see COBS 4.10.4R).

3. (3)

   6PERG 8.36.1G contains a flowchart explaining these steps.

The restriction in section 21 applies to all forms of communication such as advertising, broadcasts, websites, e-mails and all other forms of written or oral communication whether sent to one person or many. However, the restrictions only apply to a communication made in the course of business and not, for example, to personal communications between individuals.

There are extensive exemptions in the Financial Promotion Order. This is explained in greater detail in PERG 8.11 to PERG 8.15 and PERG 8.21.

4Because of the United Kingdom’s exit from the EU, the Treasury amended the Financial Promotion Order. This included the amendment or removal of certain exemptions in the Financial Promotion Order that had previously been in place to take account of the United Kingdom’s membership of the EU. Where those amendments are relevant to the guidance in this Chapter the FCA has amended the guidance accordingly. The Treasury also made transitional provision so that nothing in those amendments to the Financial Promotion Order will cause a communication to breach the restriction in section 21, if the communication is required under a contact entered into before IP completion day5, and it would not have constituted a breach if it had been made before IP completion day5.