Optimising the Regulatory Approach to Approving Financial Promotions

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In this symposium we will be discussing the HM Treasury consultation paper “Regulatory Framework for Approval of Financial Promotions”. The consultation paper, released in July, is looking to improve and strengthen how the Financial Conduct Authority deal with financial promotions for unauthorised firms by introducing a new “regulatory gateway.” Under the current rules, any authorised firm can approve a financial promotion of an unauthorised firm without having to pass a specific test of suitability or competence before it does so. The Financial Conduct Authority has recently identified a number of cases where authorised firms have either failed to undertake adequate due diligence to ensure that the approved promotions meet their requirements; or approved financial promotions which relate to products beyond their sphere of expertise and which, as a result, fail to comply with the rules. It is the Government’s view that the current rules are not enough of a safeguard to ensure promotions are fair, clear and not misleading. The introduction of a “regulatory gateway” as proposed by the Treasury, would force firms to obtain approval from the FCA first if it wants to approve an unauthorised firm’s promotions. The paper identifies two options for delivering this gateway: Option 1: Restricting approval of the financial promotions of unauthorised firms through the imposition of requirements by the FCA Option 2: Specifying the approval of financial promotions communicated by unauthorised persons as a ‘regulated’ activity under FSMA We will also be discussing what we think needs to be done in order to strengthen the protection of the consumers in relation to the approval of advertising. The big question is: Will the new measures put forward by HMTS be enough to protect consumers from harm?