On 6 December 2022, the FCA published its Consultation CP22/27 on introducing a new regulatory gateway for firms approving financial promotions. As proposed in the Financial Services and Markets Bill, this is the set of requirements that must be met by all authorised persons before they may approve the financial promotions of unauthorised persons (i.e. unregulated firms).
The FCA argues that it sees too many non‑compliant promotions being approved and then communicated by unauthorised firms, leading to a significant risk of harm to retail customers. The objective of the proposals is to enhance consumer protection by requiring firms to demonstrate that they have the necessary expertise in relation to the financial promotions they wish to approve.
The consultation takes in the following areas:
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How the FCA assesses applicants at the new gateway, and the basis for granting or refusing applications;
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A bi-annual reporting requirement for firms that are given permission to approve financial promotions;
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A requirement that firms with the permission to approve financial promotions must notify the FCA when they approve, or amend, or withdraw approval of, a financial promotion, within 7 days of doing so;
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Not extending the compulsory jurisdiction of the Financial Ombudsman Service to the approval of financial promotions; and
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Further consequential changes made to the FCA’s non-Handbook guidance for firms approving promotions, including additional text on the Consumer Duty.
The FCA clarifies that it does not expect its proposals to generally be relevant to Principal Firms approving the financial promotions of their Appointed Representatives, or of unauthorised persons within a corporate group. They should also not apply where an authorised person approves their own promotions for onward communication by an unauthorised person.
The consultation closes on 7 February 2023 and will be subject to the Financial Services and Markets Bill currently going through Parliament. HM Treasury is also expected to put in place a transition period for existing authorised firms, enabling them to continue approving financial promotions until their applications have been determined.
