Guidance on Financial Promotion

Richard Stocks, Director of Authorisation at the FSA, said:

The new regime, which operates under the Financial Services and Markets Act, has been updated to cover developments in the industry and new technologies such as the Internet. The guidance we are issuing today will be of particular help to publishers, broadcasters, website operators, financial services companies and their advisers to understand the new arrangements and keep within the requirements.

The guidance covers such areas as:

• The meaning of financial promotion;
• Exemptions available from the financial promotion rules designed to ensure that consumers will continue to be able to receive useful information in the media on financial services;
• Exclusions available for publishers, providers of news and information services, and broadcasters from the requirement to be authorised to give investment advice; and
• Definition of an Open-ended investment company (OEIC).

Financial Promotion and Related Activities

The guidance sets out the FSAs interpretation of the Financial Promotions Order and of the related regulated activities of advising on and arranging deals in investments.

Applications for certification

The Act provides that periodical publications and news and broadcast services are excluded from the requirement to be authorised for advising on investments, provided the principal purpose of the publication or service is not to give investment advice or to lead or enable people to buy or sell investments. The FSA guidance explains more fully what this means. If requested by the owners of these publications or services, the FSA may issue a certificate confirming that they are exempt and the guidance explains how certificates may be obtained. The system is similar to that which has operated for the last 13 years under the Financial Services Act 1986.

Open-ended Investment Companies

This guidance, which sets out the FSAs views on the definition of an open-ended investment company in terms of the new Act, should assist UK and overseas investment companies and their advisers in determining:

• whether a company needs to be authorised;
• whether offers of a company's securities are subject to the Public Offers of Securities Regulations 1995, or to the restrictions on unregulated collective investment schemes in section 238 of the Act; and
• the tax treatment of a company.
  

Notes for editors

1. CP 104, The Authorisation Manual: Supplementary consultation on Certifications, Financial Promotion and related activities, and Open-ended Investment Companies is available on the FSA Website www.fsa.gov.uk.

2. The consultation runs to 28 September 2001. The FSA will publish a Response Statement summarising the main issues raised in the consultation process and how it proposes to address them.

3. Section 21 of the Financial Services and Markets Act says that a person, must not, in the course of business, communicate an invitation or inducement to engage in investment activity unless they are an authorised person or the content of the communication is approved by an authorised person. It also provides exemptions from this restriction. The Financial Promotion Order, made under the Financial Services and Markets Act, describes the operation of Section 21 and sets out the exemptions from the restriction.

4. The guidance on applications for certification will form Chapter 7 of the Authorisation manual. The guidance on Financial Promotion and Open-ended Investment Companies will be Appendices to the Manual. Guidance of the kind published today is known as perimeter guidance and the FSA intends to give further such detailed guidance in future which will form further appendixes to the Authorisation Manual.

5. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; the protection of consumers; and fighting financial crime.

6. The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.