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AUTH App 1.3 Financial promotion

AUTH App 1.3.1G

The basic restriction on the communication of financial promotions is in section 21(1) of the Act. Sections 21(2) and (5) disapply the restriction in certain circumstances. Their combined effect is that a person must not, in the course of business, communicate an invitation or inducement to engage in investment activity unless:

  1. (1)

    he is an authorised person; or

  2. (2)

    the content of the communication is approved for the purposes of section 21 by an authorised person; or

  3. (3)

    the communication is exempt under an order made by the Treasury under section 21(5) - the Financial Promotion Order (as amended).

AUTH App 1.3.2G

Section 21 of the Act does not itself (other than in its heading and side-note) refer to a 'financial promotion' but rather to the communication of 'an invitation or inducement to engage in investment activity'. References in this guidance to a financial promotion mean an invitation or inducement to engage in investment activity.

AUTH App 1.3.3G

Section 21 of the Act contains a number of key expressions or phrases which will determine whether or not it will apply. These are:

  1. (1)

    'invitation or inducement' (see AUTH App 1.4);

  2. (2)

    'in the course of business' (see AUTH App 1.5);

  3. (3)

    'communicate' (see AUTH App 1.6);

  4. (4)

    'engage in investment activity' (see AUTH App 1.7); and

  5. (5)

    'having an effect in the United Kingdom' (see AUTH App 1.8).

AUTH App 1.3.4G

The FSA's views as to the meaning of these are explained in AUTH App 1.4 to AUTH App 1.8.

AUTH App 1.3.5G

In addition, this guidance deals with other factors such as when the exemptions in the Financial Promotion Order can be applied, including the exemptions relating to territorial scope and one-off financial promotions.

AUTH App 1.3.6G

Section 21 of the Act was commenced, for most purposes, on 1 December 2001. However, it did not come into effect as respects financial promotions about funeral plan contracts until 1 January 2002 and will not come into effect for financial promotions about agreements for qualifying credit until a date in 2004 yet to be set by the Treasury. Guidance on the application of section 21 to financial promotions about funeral plans is in AUTH App 1.16.