PERG 8.3 Financial promotion

The basic restriction on the communication of financial promotions is in section 21(1) of the Act. Sections 21(2) and (5) disapply the restriction in certain circumstances. Their combined effect is that a person must not, in the course of business, communicate an invitation or inducement to engage in investment activity unless:

1. (1)

   he is an authorised person; or

2. (2)

   the content of the communication is approved for the purposes of section 21 by an authorised person; or

3. (3)

   the communication is exempt under an order made by the Treasury under section 21(5) – the Financial Promotion Order (as amended).

The effect of section 21(2A) of the Act is that an authorised person is unable to approve the content of a communication for the purposes of section 21 unless:

1. (1)

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

2. (2)

   an approver permission exemption applies.

Section 21 of the Act does not itself (other than in its heading and side-note) refer to a ‘financial promotion’ but rather to the communication of ‘an invitation or inducement (a) to engage in investment activity or (b) to engage in claims management activity’. References in this guidance to a financial promotion mean an invitation or inducement to engage in investment activity or to engage in claims management activity.

Section 21 of the Act contains a number of key expressions or phrases which will determine whether or not it will apply. These are:

1. (1)

   'invitation or inducement' (see PERG 8.4);

2. (2)

   'in the course of business' (see PERG 8.5);

3. (3)

   'communicate' (see PERG 8.6);

4. (4)

   'engage in investment activity' (see PERG 8.7);

5. (4A)

   ‘engage in claims management activity’ (see PERG 8.7A); and

6. (5)

   'having an effect in the United Kingdom' (see PERG 8.8).

The FCA's views as to the meaning of these are explained in PERG 8.4 to PERG 8.8.

In addition, this guidance deals with other factors such as when the exemptions in the Financial Promotion Order can be applied, including the exemptions relating to territorial scope and one-off financial promotions.