How the exemptions work
Section 21 of the Financial Services and Markets Act 2000 (FSMA) restricts financial promotions by unauthorised persons, and section 21(5) lets the Treasury specify circumstances in which the restriction does not apply. The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, usually called the FPO, is where it has done so.
An exemption does not stop a communication being a financial promotion. It means the communication can be made without being made or approved by an authorised firm, provided every condition is met at the time it is made.
The FPO draws distinctions that affect which exemptions are available. A real-time communication, such as a call or a meeting, is treated differently from a non-real-time one, such as a website, an email or a document. A solicited communication, one the recipient asked for, is treated differently from an unsolicited one. Some exemptions only cover certain controlled investments or activities.
The main exemptions in summary
| Exemption | Who it is aimed at | Key conditions |
|---|---|---|
| Investment professionals (article 19) | Authorised and exempt persons, governments and others whose ordinary activities involve them in investment activity of the kind promoted | Made only to, or directed only at, such persons. Set indications that it is aimed at people with professional experience and that others should not rely on it. |
| High net worth companies and associations (article 49) | Companies, partnerships, unincorporated associations and trusts that meet financial thresholds in the FPO, and people acting for them in that capacity | Directed only at persons within the exemption. Set indications in the communication. Thresholds must be checked in the current FPO. |
| High net worth individuals (article 48) | Individuals who have signed a statement in the prescribed form confirming they meet income or net asset conditions | Generally limited to certain investments in unlisted companies. A signed statement within the set period. Prescribed warnings in the communication. |
| Certified sophisticated investors (article 50) | Individuals certified by an authorised firm as knowledgeable enough to understand the risks of a type of investment | A current certificate from an authorised firm, a signed statement from the investor and prescribed warnings in the communication. |
| Self-certified sophisticated investors (article 50A) | Individuals who sign a statement that they meet one of the experience criteria in the FPO | Generally limited to certain investments in unlisted companies. A signed statement within the set period. Prescribed warnings in the communication. |
| Overseas recipients (article 12) | People outside the UK | Received outside the UK or directed only at people outside the UK, with conditions about indications, access from the UK and systems to stop UK persons taking part. |
| One-off communications | A single recipient or a group acting jointly | Genuinely one-off and tailored to the recipient, not part of a wider campaign. Unsolicited real-time one-off communications have extra conditions. |
There are many others. They include generic promotions that do not identify a particular provider, communications to existing members or creditors of a company about its own investments, employee share schemes, the sale of a company, communications by journalists and material required by other rules, such as some documents connected with offers of securities. Each has its own scope and conditions.
The conditions are the exemption
Most problems with exemptions come from the conditions rather than the headline. These are the areas that matter most often.
Who the communication is directed at. An exemption based on the recipient can be lost if the material is published openly, posted on social media or forwarded beyond the intended audience. Several exemptions require the communicator to believe on reasonable grounds that the recipient falls within the exemption, and some require the communication to be directed only at the exempt group.
Required statements. Several exemptions require specific indications or warnings in the communication itself. The investor exemptions also require the recipient to have signed a statement in a prescribed form within a set period. Missing, altered or out-of-date wording can mean the exemption is not available.
Records. Keep evidence that each condition was met when the communication was made, such as signed investor statements, certificates, distribution lists and how access to the material was controlled. If a promotion is challenged, the person relying on an exemption will in practice need to be able to show that it applied.
The investment itself. An exemption that works for shares in an unlisted company may not work for a fund, a loan note sold through a platform or a cryptoasset. The scope of each exemption has to be read against the specific investment being promoted.
The 2024 changes to the investor exemptions
The investor thresholds, the criteria for self-certified sophisticated investors and the form of the required statements were changed in early 2024. Some of those changes were then reversed a few weeks later. As a result, templates, older guidance and statements collected under earlier versions may not be right today. This page deliberately does not state the figures. Check the current text of the FPO before relying on these exemptions, and check whether any statement you hold was signed in the form that now applies.
Your operations are a separate question
FPO exemptions deal only with marketing. They say nothing about whether your business needs authorisation for what it does. That question is decided under section 19 of FSMA and the Regulated Activities Order, which has its own exclusions. A company can rely on an exemption for its investor communications and still need to look at whether, for example, the arrangement it is raising money for is a collective investment scheme. Exclusions and exemptions compared · How the operations test works
Common misunderstandings
We put a disclaimer on it
A line saying the material is only for sophisticated investors does not create an exemption. The conditions about recipients, statements and records have to be met.
Our investors are wealthy, so we are exempt
Wealth alone is not enough. The exemptions depend on signed statements, certificates or the type of entity, in the prescribed form.
The exemption covers the whole campaign
Exemptions apply communication by communication. A public post about the same raise may not fit the exemption your investor pack relies on.
If we are exempt, no rules apply
An exemption only lifts the section 21 restriction. Misleading statements can still create liability under other law.
When a written opinion helps
Exemptions are where businesses most often believe they are covered and are not. A solicitor’s written opinion can look at your actual communications, the people you send them to, the statements you collect and how you control distribution, and set out whether an exemption is available. It is also the kind of document an approver, investor or platform may ask to see. How written opinions work
Primary sources
- Financial Services and Markets Act 2000, section 21: restrictions on financial promotion
- Financial Services and Markets Act 2000 (Financial Promotion) Order 2005
- Financial Promotion Order, article 12: communications to overseas recipients
- Financial Promotion Order, article 19: investment professionals
- Financial Promotion Order, article 48: high net worth individuals
- Financial Promotion Order, article 49: high net worth companies and associations
- Financial Promotion Order, article 50: certified sophisticated investors
- Financial Promotion Order, article 50A: self-certified sophisticated investors
- FCA Handbook, PERG 8: financial promotion and related activities