A financial promotion is a communication that is an invitation or an inducement to engage in investment activity.
In other words, there is an element of persuasion. An inducement is intended to lead, ultimately, to an agreement to engage in investment activity. So an advertisement by a firm claiming customers will make a fortune by investing in securities, and that the firm can help them invest, is an inducement to engage in investment activity.
Financial promotions can be communicated through a number of means, such as:
> product brochures;
> general advertising in magazines, newspapers, radio, TV and websites;
> written correspondence;
> sales aids; and
> social media.
The FCA's rules apply across all forms of media. When deciding whether a communication is a financial promotion, they look at whether it is an 'invitation or inducement to engage in investment activity', not the way it is communicated. For example, a telephone call, presentation or conversation with a prospective investor will also be considered to be a financial promotion if the conversation is ultimately leading the prospective investor to invest in your financial product.
Under section 21 of the Financial Services & Markets Act 2000 (FSMA), an unauthorised person may not communicate a financial promotion in the UK, in the course of business, unless either:
1) its contents are approved for the purposes of section 21 by an authorised person; or
2) it is subject to an exemption under the Financial Services & Markets Act 2000 (Financial Promotion) Order 2005 (FPO)
You may also be interested in reading:
Financial Promotions - Key Issues to Avoid
Financial Promotions - Prominence
Financial Promotions - Going Digital
Pure FS Support will manage and coordinate your financial promotion process ensuring that you adhere to the rules imposed by the FCA. See more about our financial promotions services and we look forward to discussing your requirements with you. Our contact details can be found here.