New regulatory powers Regulatory gateway for approving financial promotions
A financial promotion is a communication that contains an invitation or inducement to engage in a financial product or service. Such communications can take a wide variety of forms, including advertisements placed through print, broadcast or online media; marketing brochures; direct mail; or use of social media. Financial promotions are often consumers’ first contact with an investment opportunity and so can have a significant influence over the financial decisions they make.
	The financial promotions regulatory regime in the UK seeks to ensure that consumers are provided with clear and accurate information that enables them to make appropriate decisions for their individual circumstances. Under the current regime, financial promotions communicated by unauthorised firms (i.e., firms that are not authorised to carry out a regulated activity by the FCA or the PRA) must be approved by firms that are authorised by the FCA or the PRA, unless the promotion is otherwise subject to an exemption.
	Authorised firms have a responsibility to ensure that any financial promotions they approve are compliant with relevant FCA rules, helping to protect consumers from potentially harmful promotions.
	Currently, any authorised firm can approve any financial promotion of an unauthorised firm and there is no specific suitability test or assessment that the authorised firm has to meet in order to do so. This gives rise to three risks:
An authorised firm can approve the financial promotion of another firm operating in an area in which the authorised firm has no specific expertise;
Some authorised firms may approve the financial promotions of unauthorised firms without undertaking sufficient due diligence around the firm or the promotion; and
It acts as an obstacle to the FCA in exercising appropriate regulatory oversight of those firms that are approving the financial promotions of unauthorised firms. For example, firms are not currently required to notify the FCA when they are approving the financial promotions of unauthorised firms. The FCA therefore often only finds out about financial promotions that do not meet its rules via complaints or reports. This means that the FCA often only becomes aware of the potential for harm after it has occurred.
	These risks can result in significant harm to consumers, including investor loss, re-direction of investment away from more appropriate products, and a loss of consumer confidence in the financial services sector.
	To address this, the Act establishes a regulatory "gateway", which authorised firms must pass through before being able to approve the financial promotions of unauthorised firms. Any authorised firm wishing to approve the financial promotions of unauthorised firms will first need to obtain the permission of the FCA. The FCA will also be able to place limitations on the types of promotions authorised firms will be able to approve, for example, restricting firms to approving financial promotions in their field of expertise.
	The regulatory gateway aims to improve the quality of financial promotions communicated by unauthorised firms, by allowing only those authorised firms that the FCA assesses as suitable and with sufficient expertise to approve the promotions of unauthorised firms. It will also give the FCA greater oversight of the approval of financial promotions and reduce the number of authorised firms that are able to undertake such approvals.