The Financial Services and Markets Act 2023 (FSMA 2023) introduces a new regulatory mechanism, the Regulatory Gateway, for the endorsement of financial promotions by unauthorised firms. FSMA 2023 modifies section 21 of the Financial Services and Markets Act 2000, introducing a new requirement termed the ‘Financial Promotion Requirement’ (FPR) applicable to both existing and newly authorised entities.
This requirement prohibits authorised firms from endorsing financial promotions without prior permission from the Financial Conduct Authority (FCA) for unauthorised parties. The implementation of the Regulatory Gateway is already in effect since the 7th February 2024.
Entities failing to obtain FCA Approver Permission by the deadline of February 6, 2024, will forfeit their authority to endorse financial promotions, unless exemptions apply or until they secure approval from the FCA. However, firms that submitted applications during the initial window, closing on February 6, 2024, will maintain the permission to endorse financial promotions for unauthorised parties while awaiting the FCA’s decision on their applications.
Incorporating the Regulatory Gateway into the FCA Handbook
After consulting in CP22/27 and finalising policy in PS23/13, the FCA has implemented changes to the FCA Handbook through an amending Instrument, effective from 6th November 2023. Alongside modifications to existing Handbook sections, this Instrument introduces a new chapter, SUP 6A, outlining rules and guidance for seeking Approver Permission, as well as a new annex, SUP 16 Annex 55R, detailing investment categories for notifications and reports concerning approvals of financial promotions.
Integrating Cryptoassets into Financial Promotions Regulations
The FCA has implemented new rules for cryptoasset financial promotions to ensure consumers receive sufficient information for informed decision-making.
On June 8, 2023, the FCA released final rules (PS23/6) and a consultation (GC23/1) regarding financial promotions for cryptoassets. These rules were extended to promotions of qualifying cryptoassets on October 8, 2023.
Firms can lawfully communicate such promotions to UK consumers through the following routes:
- Communication by an authorised person.
- Approval by an authorised person.
- Communication by (or on behalf of) a cryptoasset business registered with the FCA under the Money Laundering Regulations 2017 (MLRs) but not authorised.
- Compliance with exemptions outlined in The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (FPO).
On November 2, 2023, the FCA issued Finalised non-handbook guidance on cryptoasset financial promotions (FG23/3FG23/3) (the “Guidance”). While not mandatory for regulatory compliance, adhering to the Guidance is seen by the FCA as meeting regulatory requirements. Thus, it’s a valuable tool for firms to ensure compliance with regulations on cryptoasset financial promotions.
Next Steps
The following practical questions could be relevant in determining whether a firm needs to take action in order to comply with the new Regulatory Gateway:
- Determine if your financial promotion activities fall under the scope of the Regulatory Gateway or qualify for one of the three exemptions.
- Identify the necessary steps to gather information for completing the application process, whether for new approval or variations to existing permissions.
- Assess whether the Regulatory Gateway necessitates updates to your policies and controls.
- Evaluate how the Regulatory Gateway and its exemptions will impact your relationships with affiliates/influencers.How Can Complyport Help?
How Can Complyport Help?
We have tested and structured solutions via authorised parties for financial promotions
Furthermore, our team is closely monitoring updates and can help you determine all necessary steps for compliance with the Regulatory Gateway and Financial Promotions, including:
- completing the FCA application process;
- updating policies and controls;
- assessing the impact on your relationships with affiliates/influencers;
- asistance and advice regarding your financial promotions;
- digitalising your financial promotions approval process.
We’re here to help.
Contact Thomas Salmon, Regulatory Business Solutions, via email at thomas.salmon@complyport.co.uk
About Complyport
Complyport is a market-leading consulting firm supporting the UK financial services industry for over 22 years. We specialise in providing Governance, Risk and Compliance services to support the regulated financial services industry to raise standards and thrive.
Complyport can assist with the preparation of a GAP analysis and impact assessment on the investment firm’s capital adequacy and risk management framework of the Company under the regulatory framework.
We specialise in supporting the UK financial services industry with compliance guidance, advice and best practice.
- Financial Promotions guidance, support, and management software solutions
- Operational resilience & Cybersecurity advice
- Financial Crime support and Forensics
- Compliance managed services and resourcing compliance personnel
- Skilled Person Reviews and Regulatory Investigation
- Consumer Duty implementation advice
- CASS advice and protections of client assets
- Prudential support, IFPR, ICARA and financial resilience advice
- Comprehensive compliance work-flow management software
Contact Thomas Salmon, Regulatory Business Solutions via email at: thomas.salmon@complyport.co.uk to book a free consultation.
