They’ve been a long time coming, but now at last, the new “financial promotion” rules are on the horizon courtesy of the Financial Services and Markets Act 2000.
New development: The coming into force of t The coming into force of the Financial Services and Markets Act 2000 and the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001
Since 1997 the wheels have been in motion to create a new regulatory system for the financial services industry. On the chopping block will be the system created by the Financial Services Act 1986. In 2000 the Financial Services and Markets Act 2000 (“the FSMA”) reached the statute books, underpinning the new arrangements and vesting all necessary powers in the new regulatory quango, the Financial Services Authority (“the FSA”). This year, amongst a raft of secondary legislation, materialised the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 (“the FPO”). Pretty much all the new rules relevant to the marketing of financial services are due to come into force at midnight on Friday 30 November 2001.
What will change: Not much in terms of how the system basically works. In other words, it will continue to be the case that all marketing material caught by the legislation will have to be either issued or approved by an “authorised person.” This will apply across the board unless the marketing communication is exempted by the FPO. So much is clear from the FSMA. But this is not the end of the story. An authorised person is required to ensure that all relevant communications comply with other detailed rules. At present these are contained in Chapter 3 of the FSA’s bible, the FSA’s Conduct of Business Sourcebook.
What types of marketing communication are caught by the new rules? The definition is wider than under the 1986 regime. There the rules caught “investment advertisements.” These were defined as (we paraphrase) every form of advertising either (1) inviting persons to enter into or offer to enter into a contract for the purchase of financial services or (2) likely to lead, directly or indirectly, to persons doing so.
Under the FSMA the net is cast wider by extending to any “communication” in the course of business of an invitation or inducement to engage in investment activity. Now clearly caught for example will be unsolicited calls and, according to the FSA, communications such as websites originating outside the UK which are nevertheless capable of having an effect inside the UK.
It will be a criminal offence to issue any of these communications unless either (1) the particular communication is exempted by the FPO or (2) the issuer is an authorised person or has obtained the specific approval of an authorised person.
Exempted categories of communication include “solicited real time communications.” Here the FPO offers what is probably (SMS and e-mail marketers please note) the first ever UK statutory definition of the term “solicited.” Essentially, to be “solicited” the communication in question, whether it is an e-mail, telephone call or visit, must have been “initiated by the recipient of the communication” or “made in response to an express request from the recipient.”
There are numerous other exemptions, and more detailed guidance in the Conduct of Business Sourcebook. We will save these, however, for further, more in-depth marketinglaw reports as the legislation comes closer.
What happens next: The legislation comes into force 1 November 2001