AUTH 7.4 Does the article 54 exclusion apply?

The exclusion applies to advice given in one of the following formats:

1. (1)

   advice in writing or other legible form which is contained in a newspaper, journal, magazine, or other periodical publication;

2. (2)

   advice in writing or other legible form which is given by way of a service comprising regularly updated news or information;

3. (3)

   advice given in any service consisting of the broadcast or transmission of a television or radio programme.

But the exclusion applies only if the principal purpose of the publication or service is not: 1

1. (1)

   to advise on securities or relevant investments or regulated mortgage contracts: or1

2. (2)

   to lead or enable persons to:1

   1. (a)

      buy, sell, subscribe for or underwrite securities or relevant investments; or (as the case may be)1

   2. (b)

      to enter as borrower into regulated mortgage contracts, or vary the terms of regulated mortgage contracts entered into by the persons to whom the advice is given as borrower.1

1. (1)

   There are two specified formats for advice appearing in writing or other legible form.

2. (2)

   The first is that of a newspaper, journal, magazine or other periodical publication. For these purposes it does not matter what form the periodical publication takes as long as it can be read. This will include, for example, a newspaper appearing as a hard copy or electronically on a website. It will also include any periodical published on an intranet site.

3. (3)

   The second is that of a regularly updated news or information service. As with periodical publications, it does not matter how the service is accessed by, or delivered to, the user as long as it can be read. This will include, for example, a service provided through teletext, a fax retrieval system or a website (including websites that are used through handheld devices). The fact that it must be a 'regularly updated' service means that the provision of up-to-date news or information must be a primary feature of the service (for example, where it is likely to be of commercial value to the recipient). But, in the FSA's view, a news or information 'service' is not restricted to the giving of only news or information since this would not generally constitute the regulated activity of advising on investments (see AUTH App 1 (Advice or information)) or advising on regulated mortgage contracts (see AUTH App 4.6.10 G (Advice or information)). So the exclusion applies to services providing material in addition to news or information, such as comment or advice.1

The third specified format is for advice in any service consisting of the broadcast or transmission of television or radio programmes. This will encompass the transmission through cable of interactive television programmes. In the FSA's view, 'service' in this context goes beyond any particular series of programmes broadcast or transmitted through a given medium. It refers instead to the administrative system (usually aimed at a particular audience) through which a range of different programmes is provided, for example any particular TV or radio channel. In the FSA's view, it is unlikely that a TV or radio service will have one of the principal purposes that would prevent its being able to rely on the exclusion unless the complete service is designed to focus on financial or investment matters.

The exclusion applies only if the principal purpose of the publication or service is not:1

1. (1)

   to give advice on securities, relevant investments or regulated mortgage contracts (see AUTH 7.3.1 G) or;1

2. (2)

   to lead or enable persons to:1

   1. (a)

      buy, sell, subscribe for or underwrite securities or relevant investments; or1

   2. (b)

      to enter as borrower into regulated mortgage contracts, or vary the terms of regulated mortgage contracts entered into by persons to whom the advice is given as borrower.1

References to leading or enabling persons to do the things mentioned in (a) or (b) are abbreviated in AUTH 7.4.9 G and AUTH 7.4.11 G as leading or enabling persons 'to engage in a relevant transaction'.1

Any assessment of the principal purpose of a periodical publication, news service or broadcast needs to be carried out against the background that:

1. (1)

   they all share the characteristic of being available over a sustained period and, within that period, appearing from time to time with a different content;

2. (2)

   the same periodical publication will have many different editions;

3. (3)

   the regular updating of the news or information service will produce differences in the material provided, comparing the content of the service as it appears at any one time with its content as it appears at any other; and

4. (4)

   the programmes in a TV or radio service are bound to have a different content from each other.

To address this feature of variation in content, article 54 requires that the principal purpose of a publication or service is to be assessed by looking at the publication or service taken as a whole and including any advertisements or other promotional material contained in it. This requirement of an overall assessment of purpose or purposes goes beyond the content of any particular example of the publication or service (such as a particular edition or programme). It fixes instead on the characteristic content of the publication or service looked at over time. This judgment depends on the overall impression of content. One way of approaching this is to consider what an average consumer of a publication or service might expect to find when making a decision whether to buy a particular edition or to use the service.

Looking at the first disqualifying purpose set out in the exclusion, all the matters relevant to whether the regulated activities of advising on investments or advising on regulated mortgage contracts are being carried on must be taken into account (see AUTH App 1 Advising on investments). If the principal purpose of a publication or service is to give to persons, in their capacity as investors (or potential investors) or as borrowers (as the case may be), advice as referred to in AUTH 7.4.5 G (1), then the publication or service will not be able to benefit from this exclusion. 1

For the second disqualifying purpose, the focus switches to assessing whether the principal purpose of a publication or service is to lead a person to engage in a relevant transaction or enable him to do so. This disqualifying purpose is an alternative to the first. So it extends to material not covered by the first. In this respect :

1. (1)

   material in a publication or service that invites or seeks to procure persons to engage in a relevant transaction can be said to "lead" to those transactions even if it would not constitute the regulated activity of advising on investments or advising on regulated mortgage contracts; this includes, for example, material that consists of generic buy or sell recommendations, corporate brochures or invitations to invest in particular products or with a particular broker or fund manager; and1

2. (2)

   material enables persons to engage in a relevant transaction if it facilitates the transactions, for example by giving a user the forms that enable him to carry out relevant transactions; so this limb of the second disqualifying purpose would apply to the material providing an online dealing facility on an interactive website or to facilities for on-screen dealing through digital television.

In the FSA's view, material will not lead or enable a person to engage in a relevant transaction where the material is intended merely to raise people's awareness of matters relating to securities, relevant investments or regulated mortgage contracts.1

The test for determining the principal purpose of any publication that appears on a website, or of any news or information service on a website, is no different from any other medium. An overall view will need to be taken of all the contents of the publication or service, including any features such as chatrooms, advertisements or other promotional material.

In the context of the second disqualifying purpose, whether or not the presence of a hypertext link to another website indicates that the purposes of a publication or service include leading to relevant transactions (or enabling them to be entered into) will depend on all the circumstances. It will, in particular, be necessary to consider the form of the link and the content of the destination website. In the FSA's view, the presence on a host publication or service of a hypertext link which is only the name or logo of another website is unlikely itself to indicate that a purpose of the host website is to lead to relevant transactions (or enable them to be entered into). But if more sophisticated links, such as banners or changeable text, contain promotional material inviting or seeking to procure persons to enter into relevant transactions, those links will have to be weighed in the balance in determining the principal purpose of the publication or service hosting the link. The same applies if the host publication or service hosting the link itself contains material inviting persons to activate the link with a view to entering into relevant transactions.

In reaching a view of the principal purpose of the publication or service as a whole, all the material that falls within either the first or second disqualifying purpose must be considered together.

The persons who directly benefit from the exclusion will be the persons who would otherwise require authorisation (see AUTH 7.3.9 G), that is, the person whose business it is to have editorial control over the content of the publication or service. The exclusion will apply regardless of the legal form of the person giving the advice so, for example, it will extend to advice given by a company through its employees.1