58.This section prohibits unauthorised persons from issuing financial promotions, unless the content of the promotion is approved by an authorised person (who will be subject to rules made by the Authority), or unless an exemption applies.  The regulation of financial promotions under the Act is similar to the regulation of investment advertisements and cold-calling under the FS Act 1986.  However, section 21 reflects changing technologies and the fact that the borderline between advertisements and unsolicited calls has become blurred.  Sections 238 to 241 contain additional provisions relating to the promotion of collective investment schemes.
59.The prohibition applies to “invitations” or “inducements” to engage in investment activity, which are made in the course of business.  The Treasury are given power, if necessary, to determine the meaning of “in the course of business”.  The prohibition will potentially catch communications whether they are made in the United Kingdom, into the United Kingdom from elsewhere, or from the United Kingdom to another country.  Communications from outside the United Kingdom can potentially be caught only if they can have an effect in the United Kingdom (subsection (3)).  It is expected that the exemption order which the Treasury intends to make under subsection (5) will further limit the territorial application of the financial promotion regime, so that communications issuing from overseas will generally only be caught if they are directed at the United Kingdom.  This will be of particular significance in the context of internet communications.
60.Subsection (5) confers a power on the Treasury to make exemptions from the prohibition, similar to the power to make exemptions from the investment advertisement prohibition under the FS Act 1986.  It is possible for these exemptions to be made conditional on compliance with rules made by the Authority under section 145.
61.Subsection (6) makes clear that the circumstances that can be specified under subsection (5) extend to circumstances for which subsection (3) expressly makes provision.  Subsection (6) thus clarifies that an exemption can be made for communications which originate outside the United Kingdom even if they are capable of having an effect here.  Subsection (6)(a) and (b) deal expressly with the possibility of exemptions for communications originating in specific countries, or specific groups of countries such as EU countries.  Subsection (6)(d) would allow all communications originating overseas to be exempted if that became appropriate.  If such provision were made, subsection (7) would allow the Treasury to repeal subsection (3).
62.Subjections (8) to (12) govern what constitutes “engaging in investment activity”.  Subsections (9) and (10) give the Treasury power to determine the scope of the prohibition on financial promotion.  It is expected that “controlled activities” will be the activities which are regulated under the Act, together with activities which would be regulated, but for an exclusion in an order made under section 22(1).  This broad approach reflects the position under the FS Act 1986.
Commentary on Sections Part Ii: Regulated and Prohibited Activities Section 21: Restrictions on financial promotion