Financial Promotions Approval: What You Need to Know

Marketing financial services in the United Kingdom is not like promoting any other product. The Financial Services and Markets Act 2000 (FSMA) imposes strict controls on financial promotions—and getting it wrong can result in significant regulatory consequences, reputational damage, and even criminal liability.

Whether you're an unauthorised firm looking to advertise investment products, a fintech startup promoting a new payment service, or an established business expanding into regulated activities, understanding financial promotions approval is essential. In this comprehensive guide, we examine what counts as a financial promotion, who needs approval, the routes to compliance, and how to choose an appropriate Section 21 (S21) approver under the new FCA gateway regime.

Why Financial Promotions Matter

Financial promotions regulation exists to protect consumers from misleading or inappropriate marketing of financial products. The consequences of non-compliant promotions can be severe:

• Criminal liability: Communicating a financial promotion without proper approval or exemption is a criminal offence under FSMA, carrying potential imprisonment of up to two years and unlimited fines.
• Regulatory action: The FCA can take enforcement action against both the firm issuing the promotion and any authorised firm that approved it.
• Consumer redress: Firms may face claims from consumers who suffered losses after acting on misleading promotions.
• Reputational damage: Public enforcement action or consumer complaints can significantly harm your brand and business relationships.

The stakes are high, which is why understanding and complying with FCA financial promotions requirements should be a priority for any firm marketing regulated products or services.

What is a Financial Promotion?

Definition Under FSMA Section 21

Section 21 of FSMA establishes the restriction on financial promotions. In essence, a person must not, in the course of business, communicate an invitation or inducement to engage in investment activity unless:

• The person is an authorised person, or
• The content of the communication is approved by an authorised person, or
• An exemption applies

The definition is deliberately broad. A "financial promotion" includes any communication that contains an invitation or inducement to engage in investment activity or claims management activity. This covers not just traditional advertisements but any communication designed to persuade someone to use a financial service or product.

What Counts as a Promotion?

Financial promotions take many forms, and firms are sometimes surprised by what falls within scope. The following all typically constitute financial promotions:

Traditional advertising:

• Print advertisements in newspapers and magazines
• Television and radio commercials
• Billboard and outdoor advertising
• Online display advertisements

Digital marketing:

• Website content describing products or services
• Social media posts promoting financial products
• Email marketing campaigns
• Search engine advertisements
• Influencer content promoting financial services

Sales materials:

• Product brochures and fact sheets
• Pitch decks and presentation materials
• Direct mail communications
• Telephone scripts used in marketing calls

Indirect communications:

• Press releases that promote services
• Testimonials and case studies
• Comparison websites featuring your products
• Affiliate marketing content

The key test is whether the communication is designed to persuade someone to engage with a financial product or service. Even apparently neutral content can constitute a promotion if its purpose is to generate business.

Territorial Scope

The financial promotions restriction applies to communications made from the United Kingdom, communications made to persons in the United Kingdom, and communications capable of having an effect in the United Kingdom. This means overseas firms marketing to UK consumers must also comply with the regime.

Who Needs Approval?

Unauthorised Firms

If your firm is not authorised by the FCA, you cannot lawfully communicate financial promotions to UK consumers unless the promotion is approved by an authorised person or an exemption applies. This affects a wide range of businesses:

• Overseas financial services firms marketing to UK customers
• Technology companies offering products that constitute regulated activities
• Introducer firms that refer customers to authorised providers
• Unregulated funds and investment vehicles
• Cryptoasset businesses promoting qualifying products

For these firms, obtaining S21 approval from an authorised approver is typically the most practical route to compliance.

Authorised Firms

FCA-authorised firms can communicate their own financial promotions without external approval, as they are directly subject to the FCA's conduct rules. However, authorised firms must ensure their promotions comply with the detailed requirements in the FCA Handbook, particularly COBS 4 (Conduct of Business Sourcebook, Chapter 4).

Authorised firms considering whether to approve promotions for third parties face additional considerations following the introduction of the S21 gateway, which we discuss below.

Exempt Promotions

Certain communications are exempt from the financial promotions restriction under the Financial Promotion Order 2005 (FPO). Key exemptions include:

• One-off communications: Non-real-time communications made to specific recipients based on individual circumstances
• Communications to high net worth individuals: Promotions to certified high net worth investors meeting specific criteria
• Communications to sophisticated investors: Promotions to certified or self-certified sophisticated investors
• Communications to investment professionals: Promotions directed at authorised persons or exempt professional firms
• Exempt persons: Communications by certain overseas persons in limited circumstances

Relying on exemptions requires careful analysis. The conditions are specific, and incorrectly claiming an exemption offers no protection against criminal liability. When in doubt, seek approval.

Routes to Compliance

Firms have three main routes to lawfully communicate financial promotions:

Route 1: Become FCA Authorised

Obtaining FCA authorisation allows your firm to communicate its own financial promotions and ensures you are directly subject to FCA supervision. This route is appropriate if you intend to carry on regulated activities as your core business.

However, authorisation is a significant undertaking involving substantial time, cost, and ongoing compliance obligations. It is not proportionate for firms whose primary business is unregulated but who occasionally need to communicate financial promotions.

Route 2: Obtain S21 Approval

For unauthorised firms, obtaining approval from an FCA-authorised person under Section 21 of FSMA is typically the most practical route. The approver takes responsibility for ensuring the promotion complies with FCA rules, allowing the unauthorised firm to lawfully communicate it.

This route has become more regulated following the introduction of the S21 gateway in 2024, which we examine in detail below.

Route 3: Rely on Exemptions

Where a valid exemption under the Financial Promotion Order applies, firms can communicate promotions without approval. However, exemptions are narrow and conditions must be strictly observed. Exemptions are generally most useful for:

• Business-to-business communications between professional parties
• Communications to genuinely sophisticated or high net worth individuals who have provided appropriate certifications
• Follow-up communications to existing clients

For mass-market retail promotions, exemptions are rarely available, making S21 approval the standard route for unauthorised firms.

Choosing an S21 Approver

The FCA Gateway (PS23/13)

In August 2023, the FCA introduced significant changes to the S21 approval regime through Policy Statement PS23/13. From 7 February 2024, authorised firms can only approve financial promotions for unauthorised persons if they have applied for, and been granted, permission to do so through the new S21 gateway.

This change was introduced to address concerns about the quality of approval practices. Previously, any authorised firm could approve promotions as an incidental activity, leading to inconsistent standards and some approvers failing to conduct adequate due diligence.

Under the new regime:

• Gateway permission required: Firms must apply to the FCA for specific permission to approve financial promotions
• Competence requirements: Applicants must demonstrate they have the expertise and resources to assess promotions properly
• Enhanced scrutiny: The FCA assesses whether the firm has appropriate systems, controls, and governance for approval activities
• Ongoing supervision: Approved firms are subject to FCA oversight of their approval activities

The gateway has significantly reduced the number of firms offering S21 approval services, meaning unauthorised firms must now choose from a smaller pool of specialist approvers.

Due Diligence on Approvers

When selecting an S21 approver, conducting thorough due diligence is essential. Consider the following factors:

Gateway authorisation: Verify that the approver has obtained gateway permission from the FCA. You can check this on the Financial Services Register.

Relevant expertise: Ensure the approver has genuine expertise in your product area. An approver experienced in investment funds may not be appropriate for consumer credit promotions.

Track record: Ask about the approver's experience approving similar promotions. Request references from comparable clients.

Process and timelines: Understand how the approver conducts reviews and how long approval typically takes. Budget sufficient time for the process.

Ongoing support: Some approvers offer ongoing support for promotion amendments and monitoring. Consider whether this is valuable for your needs.

Fee structure: Understand the approver's fees, including any charges for revisions or ongoing monitoring.

Insurance coverage: Confirm the approver maintains appropriate professional indemnity insurance.

What Approvers Need From You

To approve your financial promotion, an S21 approver must conduct proper due diligence on both the promotion and your firm. Be prepared to provide:

About your firm:

• Company registration details and corporate structure
• Details of directors and key personnel
• Business plan and financial information
• Relevant regulatory status in other jurisdictions
• Complaints history and any regulatory correspondence

About the product or service:

• Full product documentation and terms
• Target market analysis
• Risk assessments
• Pricing information and fee structures
• Performance data and supporting evidence for any claims

About the promotion:

• Draft promotional materials in all formats
• Media plan showing where promotions will appear
• Details of any intermediaries involved in distribution
• Process for capturing and retaining certifications (if relying on exemptions for some audiences)

A responsible approver will ask detailed questions. This is a positive sign that they take their approval responsibilities seriously—it should give you confidence in their service.

Content Requirements

Fair, Clear and Not Misleading

The overarching principle for all financial promotions is found in FCA Principle 7 and detailed in COBS 4.2: communications must be fair, clear and not misleading. This means:

Fair: The promotion must present a balanced picture. Benefits cannot be emphasised while downplaying risks or costs. Comparisons with competitors must be meaningful and verifiable.

Clear: The promotion must be easily understood by its target audience. Jargon should be avoided or explained. Key information must be prominent and accessible.

Not misleading: All statements must be accurate and not create false impressions. This includes ensuring promotions remain accurate over time—outdated performance data or superseded terms can render a promotion misleading.

Required Warnings and Disclosures

Depending on the product type, specific warnings and disclosures may be required. Common requirements under COBS 4 include:

Risk warnings: Investments must include appropriate warnings that capital is at risk. The specific wording depends on the product type—shares, funds, and structured products each have particular requirements.

Past performance: Where past performance is shown, standardised warnings must be included stating that past performance is not a reliable indicator of future results.

Tax treatment: If tax benefits are mentioned, warnings about the individual nature of tax treatment and potential for change must be included.

Regulatory status: The FCA-authorised status of the provider (or the fact that approval has been given by an authorised firm) should be clear.

Compensation scheme coverage: Where relevant, the availability or exclusion of Financial Services Compensation Scheme (FSCS) protection must be disclosed.

Prominence Rules

Under COBS 4.2.6R, required statements must be displayed with appropriate prominence. Key information, particularly risk warnings, must not be obscured or diminished by other content. Specific prominence rules apply to:

• Risk warnings relative to promotional claims
• Balanced presentation of benefits and risks
• Terms and conditions relative to headline offers
• Required regulatory disclosures

The FCA has taken enforcement action against firms that technically included required warnings but presented them in ways that reduced their impact—such as in small print, different colours, or locations where consumers were unlikely to see them.

Examples of Compliant vs Non-Compliant Promotions

Understanding how these requirements apply in practice helps illustrate compliant approaches.

Example 1: Investment Product Advertisement

Non-compliant version:

"Earn 12% returns with our revolutionary investment fund! Our expert managers have beaten the market for three consecutive years. Join thousands of satisfied investors today!"

Problems:

• Implies guaranteed returns without risk warning
• Past performance presented without required warnings
• Creates misleading impression about typical outcomes
• No indication of regulatory status

Compliant version:

"Our actively managed investment fund has delivered annualised returns of 12% over the past three years. Past performance is not a reliable indicator of future results. The value of investments can go down as well as up, and you may get back less than you invest. Capital at risk. [Firm Name] is authorised and regulated by the Financial Conduct Authority."

Example 2: Consumer Credit Promotion

Non-compliant version:

"Get approved in minutes! Borrow up to GBP 10,000 with flexible repayments. No credit checks required!"

Problems:

• Representative APR not shown
• Misleading impression about credit checking
• Key loan terms not disclosed
• Required health warnings missing

Compliant version:

"Personal loans from GBP 1,000 to GBP 10,000. Representative APR 18.9% (variable). Loan term 1-5 years. For a loan of GBP 5,000 over 3 years at 18.9% APR, monthly repayments would be GBP 182.79 and total amount payable GBP 6,580.44. Credit subject to status. Think carefully before securing debts against your home."

Example 3: High-Risk Investment (Appropriateness Warning)

Non-compliant version:

"Invest in the next big thing! Our early-stage portfolio gives you access to tomorrow's unicorns. Minimum investment just GBP 1,000."

Problems:

• No risk warning appropriate for high-risk investments
• Creates unrealistic expectations about returns
• Missing required statements for non-mainstream pooled investments

Compliant version:

"Our early-stage investment portfolio provides exposure to privately held growth companies. This is a high-risk investment. You could lose all the money you invest. These investments are illiquid—there is no ready market to sell your investment. Don't invest unless you're prepared to lose all your money. This is not suitable for most investors. Take time to understand the risks. [Required FCA high-risk investment warnings in full]"

How MEMA Can Help

Navigating financial promotions compliance requires specialist expertise and practical experience. At MEMA Consultants, we help firms across all regulated sectors develop and implement compliant marketing strategies.

Our financial promotions services include:

Compliance Review We review your existing and proposed promotional materials against FCA requirements, identifying compliance gaps and recommending practical solutions.

S21 Approval Support We help unauthorised firms prepare for the S21 approval process, ensuring promotional materials are "approval-ready" and supporting engagement with authorised approvers.

Approver Selection We help you identify and evaluate potential S21 approvers with relevant expertise for your product area, conducting due diligence on your behalf.

Policy Development We develop financial promotions policies and procedures to ensure your marketing function operates within a robust compliance framework.

Training We provide tailored training for marketing teams on financial promotions requirements, helping embed compliance awareness across your organisation.

Ongoing Monitoring We help establish processes for ongoing monitoring and periodic review of financial promotions to ensure continued compliance.

Whether you need a one-off compliance review, support navigating the S21 approval process, or comprehensive ongoing guidance, MEMA provides the expert assistance you need to communicate confidently within regulatory boundaries.

Ready to ensure your financial promotions are compliant? Contact our team today for a confidential consultation. We will help you understand your obligations and develop a clear pathway to compliant marketing.

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This article provides general information about financial promotions regulation and should not be relied upon as specific legal or regulatory advice. Financial promotions requirements vary based on product type, target audience, and individual circumstances. For advice tailored to your situation, please contact MEMA Consultants directly.