Financial promotions compliance: a practical UK guide

The section 21 restriction

Section 21(1) of the Financial Services and Markets Act 2000 states that a person must not, in the course of business, communicate an invitation or inducement to engage in investment activity, or to engage in claims management activity. This is known as the financial promotion restriction, and breaching it is a criminal offence. The wording is deliberately broad: an invitation or inducement can be a headline, an email, a banner advert, a video or a social media post, and it does not need to name a specific product to fall within scope.

There are three routes out of the restriction, set out in section 21(2). The communication is permitted if the person communicating it is an authorised person, if the content of the communication has been approved for the purposes of section 21 by an authorised person, or if the communication falls within an exemption specified by the Treasury under section 21(5). The exemption route is delivered through the Financial Services and Markets Act 2000 (Financial Promotion) Order, which carves out categories such as promotions to investment professionals and certain high net worth individuals.

Territorial reach is wide. Under section 21(3) the restriction applies to a communication originating outside the United Kingdom only if it is capable of having an effect in the United Kingdom, which means an overseas firm targeting UK consumers cannot escape the rules simply by hosting content abroad. The FCA's PERG 8 guidance explains in detail what counts as an invitation or inducement, what communicating means, and when a communication is made in the course of business, and it is the first place to look when the boundary of the restriction is unclear.

The fair, clear and not misleading rule

Being allowed to communicate a promotion is only half the task. The content must also meet the FCA conduct standard. COBS 4.2.1R of the FCA Handbook requires that a firm must ensure that a communication or a financial promotion is fair, clear and not misleading. The rule applies to communications with clients about designated investment business, to communications with eligible counterparties and to financial promotions communicated or approved by firms, and it is technology neutral, applying to any channel a firm uses.

The standard is proportionate. The FCA expects firms to take account of the nature of the client and the means of communication, so a promotion aimed at a retail customer will usually need more explanation and clearer risk warnings than one aimed at a professional client or eligible counterparty. What does not change is the underlying obligation: the overall impression a promotion creates must be accurate, benefits and risks must be balanced, and important information must not be hidden in small print or buried beneath marketing language.

The Handbook gives a concrete example of where firms go wrong. COBS 4.2.5G guidance states that firms should not describe a feature as guaranteed, protected or secure, or use a similar term, unless the term accurately describes the feature and the firm communicates all the necessary information, presenting it with sufficient clarity and prominence to make the use of that term fair, clear and not misleading. Words that reassure a consumer carry a heavy evidential burden, and a promotion that cannot justify them is misleading regardless of intent.

The approver permission gateway

The most significant recent change concerns the approval route out of section 21. Historically any authorised firm could approve the financial promotions of an unauthorised person. The Financial Services and Markets Act 2023 amended FSMA 2000 to close that open door. With effect from 7 February 2024 a new Financial Promotion Requirement in section 55NA restricts all authorised persons from approving financial promotions unless they hold a specific permission to do so, subject to exemptions.

The practical effect is that the approver route now requires a gate. A firm that wants to approve promotions for unauthorised persons must apply to the FCA for approver permission and demonstrate that it has the competence to assess the type of promotions it intends to approve, and appropriate policies to ensure those promotions are clear, fair and not misleading. The FCA introduced the gateway through policy statement PS23/13, and firms that applied during the initial application period, which ran from 6 November 2023 to 6 February 2024, could continue approving promotions under a transitional regime while their application was determined.

Approver permission is not a one-off badge. Firms holding it must monitor the financial promotions they approve on an ongoing basis, withdraw approval where a promotion no longer meets the rules, and report to the FCA under SUP 16.31, which requires both ad-hoc notifications about approval activity and regular reporting. If your firm relies on approving third-party promotions, or having its own promotions approved, confirming the approver's permission and its ongoing monitoring is a core control. Nasara's governance controls module gives compliance teams a single place to track which promotions have been approved, by whom and against which version of the rules.

Record-keeping requirements

Compliance that cannot be evidenced is compliance the FCA will not credit. COBS 4.11.1R requires a firm to make an adequate record of each financial promotion it communicates or approves, other than promotions made only in the course of a personal visit, telephone conversation or other interactive dialogue. In practice this means keeping the promotion itself, the compliance sign-off and the reasoning behind it, so that the firm can reconstruct what was communicated and why it was judged compliant.

Retention periods are tiered by the type of business the promotion relates to. Under COBS 4.11, records for a promotion relating to a pension transfer, pension conversion, pension opt-out or free-standing additional voluntary contribution must be kept indefinitely. Records relating to a life policy, occupational pension scheme, stakeholder pension scheme or personal pension scheme must be kept for six years. Records for MiFID or equivalent third country business must be kept for five years, and records in any other case must be kept for three years.

These periods are minimums, not targets. A firm that approves promotions for unauthorised persons also faces separate reporting obligations under SUP 16.31, and the two sets of records need to reconcile. Building a disciplined record trail is far easier when review, approval and version history sit in one workflow rather than scattered across inboxes, shared drives and marketing tools.

Social media and finfluencers

The FCA's financial promotion rules are technology neutral, so a post on social media is treated the same as an advert in a newspaper: it must be fair, clear and not misleading, and it must fall within one of the section 21 routes. In March 2024 the FCA published finalised guidance FG24/1 on financial promotions on social media, clarifying its expectations for firms and for others, such as influencers, who use social media to communicate financial promotions.

The guidance is direct about affiliate marketing. Firms working with affiliate marketers, including finfluencers, should take proactive responsibility for how those affiliates communicate financial promotions. A promotion does not stop being the firm's responsibility because it was posted by a third party, and a standalone influencer who promotes a financial product without the protection of an authorised person's approval or an exemption risks committing an offence under section 21. Following FCA engagement, several large technology companies changed their advertising policies to allow only financial promotions approved by FCA authorised firms.

The scrutiny is real. In its 2024 financial promotions data the FCA reported that it interviewed 20 finfluencers under caution and issued 38 alerts against finfluencer social media accounts during the year. Firms that use social media, whether directly or through affiliates, should treat every post as a promotion that needs the same review, approval and record-keeping as any other channel.

The FCA's power to require withdrawal

When a promotion breaches the rules, the FCA does not need to wait for a court. Under section 137S of the Financial Services and Markets Act 2000 the FCA has the power to direct a firm to withdraw a financial promotion, or to prevent it from being used in the first place. Before doing so the regulator assesses how far the promotion is unclear, unfair or misleading and which consumers it targets, and it will usually tell the firm of its concerns and give it an opportunity to respond.

When the FCA decides to act, it issues a notice of direction to the firm explaining what action it must take, which will normally be to withdraw the advert from circulation with immediate effect. A firm that disagrees can make representations to the FCA and ultimately refer the decision to the Upper Tribunal, but the direction takes effect while any challenge proceeds. The FCA may also publish a copy of the promotion and the reasons behind its decision, which turns a private breach into a public one.

The scale of intervention is now measurable. The FCA's financial promotions data for 2024 records that following its interventions, for authorised firms, 19,766 promotions were amended or withdrawn during the year, a 97.5 per cent increase on the 10,008 recorded in 2023. The regulator also issued 2,240 alerts about unauthorised firms and individuals during 2024. These numbers make the point that financial promotions compliance is an active supervisory priority, not a dormant rulebook.

Conclusion

Financial promotions compliance rests on two questions asked together. First, is the firm permitted to communicate or approve this promotion at all, whether as an authorised person, through a permitted approver or under a Treasury exemption? Second, is the content fair, clear and not misleading, with balanced benefits, prominent risk warnings and no overreaching language? A promotion must pass both tests, on every channel, including social media, and the section 55NA approver gateway means the approval route now demands a specific FCA permission rather than any authorised firm's signature.

The evidence trail is what turns good intentions into demonstrable compliance. Firms need a record of each promotion, who approved it and why, retained for the period COBS 4.11 requires, alongside the reporting that approver permission brings. With the FCA forcing tens of thousands of promotions to be amended or withdrawn each year and holding the power to direct immediate withdrawal under section 137S, a disciplined review, approval and record-keeping workflow is the difference between a controlled process and an enforcement risk. To see how a single governance platform can hold that workflow together, book a demonstration.

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