Financial Promotions Compliance Guide2025 Edition

A financial promotion is any communication that invites or induces a person to engage in investment activity. Under Section 21 FSMA, a fundamental restriction applies: in the course of business, a person must not communicate a financial promotion unless they are authorized, the content is approved by an authorized person, or an exemption applies.

Section 21 of the Financial Services and Markets Act 2000 creates the general prohibition on communicating financial promotions. The restriction applies broadly:

Breaching Section 21 is a criminal offence punishable by up to two years imprisonment and unlimited fines. Beyond criminal sanctions, there are significant civil consequences:

The Financial Promotion Order provides numerous exemptions from the Section 21 restriction. Understanding these exemptions is crucial for determining when approval is needed.

FCA-authorised firms can communicate their own financial promotions without external approval, provided the promotion complies with the FCA Handbook rules (particularly COBS 4). The promotion must still be fair, clear, and not misleading.

One-off communications are exempt if they meet specific conditions:

Several exemptions allow promotions to specific categories of sophisticated or high net worth investors:

COBS 4.2.1R requires all financial promotions to be fair, clear, and not misleading. This is the cornerstone of financial promotions compliance:

Financial promotions must include all information necessary for the recipient to make an informed decision. What constitutes adequate information depends on:

Risk warnings must be prominent and positioned effectively. The FCA requires specific warnings for different product types:

Digital channels present unique compliance challenges. All the same rules apply to social media as to other media, but implementation requires specific consideration of platform constraints.

Financial promotions made by influencers on behalf of firms require careful management:

Where character limits prevent including all required information, the FCA guidance is clear:

Enhanced requirements apply to high-risk investments (HRIs) as defined in COBS 4.7A-4.7B. These include:

For direct offer financial promotions of HRIs to retail investors, a mandatory 24-hour cooling-off period applies. During this period:

Promotions for HRIs must include a prescribed risk summary in a specific format:

From October 2023, qualifying cryptoassets became regulated under the financial promotions regime. This brought crypto promotions in line with other high-risk investment promotions.

Crypto promotions can only be lawfully communicated via one of four routes:

Crypto promotions must include specific prescribed warnings:

Unauthorised persons must obtain approval from authorised firms to communicate financial promotions. The approving firm becomes responsible for the content.

FCA rules require approving firms to conduct due diligence on both the promotion content and the person issuing it:

Approving firms assume significant liability when approving financial promotions:

Firms must retain records of all financial promotions for at least three years. This applies to both the promotions themselves and the compliance process.

Comprehensive records should include:

Records must provide a clear audit trail showing:

The Consumer Duty requires firms to focus on four outcomes when designing and communicating financial promotions:

Under the Consumer Duty, firms must ensure promotions are only directed at appropriate target markets:

The Consumer Understanding outcome sets higher standards for communications:

Financial promotions compliance has become a top enforcement priority for the FCA. In 2023-2024:

Recent enforcement actions provide valuable lessons:

Establish clear sign-off procedures for all financial promotions:

Key areas to check during compliance review:

Maintain comprehensive documentation for each approval:

Build a robust governance framework for financial promotions:

Comprehensive training program covering:

Ongoing monitoring should include:

The introduction of the Consumer Duty in July 2023 further raised the bar, requiring firms not merely to avoid misleading customers but actively to support understanding and deliver good outcomes through their communications.