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Treasury confirms tightening of financial promotions regime

Compliance Monitor

Treasury confirms tightening of financial promotions regime

The Government is creating a new regulatory ‘gateway’ that will bring significant changes to the way authorised firms can approve the financial promotions of unauthorised persons. Charlotte Hill and Daniel Hirschfield explain how the regime will operate.

In June 2021, HM Treasury confirmed that it will be introducing a new regulatory ‘gateway’, which will provide a mechanism for authorised firms to approve the financial promotions of unauthorised persons. [1] This follows its consultation on reforms to the financial promotions regime in July 2020. [2] The Government is seeking to address concerns that there is currently no specific assessment that firms must carry out before they are able to approve financial promotions of unauthorised persons under section 21 of the Financial Services and Markets Act 2000 (FSMA) (the so-called ‘financial promotion restriction’). This creates the following potential risks: a lack of expertise in relevant approver firms relating to the particular product being promoted, a lack of due diligence by approver firms, as well as regulatory oversight challenges for the Financial Conduct Authority. The reforms to the financial promotion restriction come at a time of increased regulatory scrutiny over the promotion of high-risk products, with a separate Treasury consultation in July 2020 on the promotion of cryptoassets, [3] a Treasury consultation on further regulation of non-transferable debt securities, [4] in addition to an FCA discussion paper on possible ways to strengthen its financial promotion rules for high-risk investments. [5]

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