Approving finproms - new gateway regime finalised

On 12 September 2023, the FCA published a policy statement, PS23/13, "Introducing a gateway for firms who approve financial promotions" (the PS). This supports the changes to the financial promotion approval regime in FSMA made by the Financial Services and Markets Act 2023 (FSMA 2023). These changes were published, along with an accompanying explanatory memorandum, on 6 September 2023 and introduce a new gateway for firms approving financial promotions.

What's the background?

As we reported at the time, on 22 June 2021 HM Treasury (HMT) published its response, following its July 2020 consultation, "Regulatory framework for approval of financial promotions." (See our summary of the consultation paper here.)

In the July 2020 consultation, HMT put forward two options for the introduction of a gateway though which authorised firms would have to pass if they wanted to be able to approve the financial promotion of an unauthorised person. The consultation response paper confirmed that HMT had chosen to restrict approval of financial promotions of an unauthorised person through the imposition of requirements by the FCA (rather than by specifying the approval of such financial promotions as a 'regulated activity' under FSMA).

In December 2022, the FCA published its own consultation paper, CP22/27, "Introducing a gateway for firms who approve financial promotions" (see our reporting of it here) following on from HMT's July 2020 consultation. The PS published this month contains the FCA's response to the feedback received following this (December 2022) consultation.

What changes did FSMA 2023 make?

The change brought about under FSMA 2023 add a new sub-section 21(2A) and a new section 55NA to establish a regulatory gateway through which authorised persons must pass before they can approve the financial promotions of unauthorised persons.

The gateway will require any authorised person seeking to approve the financial promotions of unauthorised persons to first obtain the FCA's permission, unless an exemption to the gateway applies.

FSMA 2023 also provides HMT with a power to create, through secondary legislation, exemptions to the new regulatory gateway requirement.

What are the exemptions?

The changes create three exemptions that operate to exempt authorised persons from the requirement to obtain permission through the new regulatory gateway where:

• the authorised person that approves the communication also prepared the content of the communication;

• the unauthorised person prepared the content of the communication and is in the same group as the authorised person that approves the communication; and

• the content of the communication is prepared by an appointed representative (that is, the unauthorised person) in relation to any regulated activity for which their principal (that is, the authorised person) has accepted responsibility, where their principal approves that communication.

The gateway comes into force on 27 September 2023.

What does the FCA Policy Statement include?

The PS sets out the FCA's final policy positions, including those on its approach to assessing applications at the gateway and the reports required of firms that approve financial promotions. It also contains near-final Handbook rules and guidance, and updated non-Handbook guidance on approving financial promotions.

The FCA intends firms to be able to submit applications for permission to approve financial promotions from 6 November 2023. The initial application period will close on 6 February 2024. On the following day, 7 February, the new legislation will come fully into force and firms that have not applied to the gateway will no longer be able to approve financial promotions (subject to exemptions).

The PS was published alongside a new webpage "Applying to approve financial promotions for unauthorised persons" and a press release.