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PERG 8.6 Communicate

PERG 8.6.1 G RP

The word ‘communicate’ is extended under section 21(13) of the Act and includes causing a communication to be made. This means that a person who causes the communication of a financial promotion by another person is also subject to the restriction in section 21. Article 6(d) of the Financial Promotion Order also states that the word ‘communicate’ has the same meaning when used in exemptions in the Order. Article 6(a) also states that the word ‘communication’ has the same meaning as ‘financial promotion’. It appears to the FCA that a person is communicating where he gives material to the recipient or where, in certain circumstances (see PERG 8.6.5 G), he is responsible for transmitting the material on behalf of another person. As both causers and communicators communicate under section 21 the distinction between them is not usually of great significance. What is important is whether a person who is not himself communicating is or is not causing a communication to be made by another. In the FCA's view, primary responsibility for a communication to which section 21 applies and which is capable of being read will rest with its originator. This is the person responsible for its overall contents. Where it is an oral communication primary responsibility will rest with the speaker. A speaker will, of course, be an individual. But where the individual speaks on behalf of his employer, it will be the employer who is responsible. The same will apply if the individual is an officer of a company or partner in a partnership and speaks on behalf of the company or partnership. Individuals who make financial promotions otherwise than in their capacity as employees, officers or partners will need to consider their own position (they may not be acting in the course of business (see PERG 8.5)). Where a person other than the originator (for example a newspaper publisher) transmits a communication on the originator’s behalf he is communicating it and the originator is causing its communication.

Persons who communicate or cause a communication

PERG 8.6.2 G RP

Apart from the originators of a financial promotion, the FCA considers the following persons to be communicating it or causing it to be communicated:

  1. (1)

    publishers and broadcasters who carry advertisements (including websites carrying banner advertisements); and

  2. (2)

    intermediaries who redistribute another person’s communication probably with their own communications.

Persons who do not communicate or cause a communication

PERG 8.6.3 G RP

In the FCA's view, the following persons will not be causing or communicating:

  1. (1)

    advertising agencies and others when they are designing advertising material for originators;

  2. (2)

    persons who print or produce material for others to use as advertisements;

  3. (3)

    professional advisers when they are preparing material for clients or advising them on the need to communicate or the merits or consequences of their communicating a financial promotion; and

  4. (4)

    persons who are responsible for securing the placing of an advertisement provided they are not responsible for its contents.

Need for an active step to communicate or cause a communication

PERG 8.6.4 G RP

The FCA considers that, to communicate, a person must take some active step to make the communication. This will be a question of fact in each case. But a person who knowingly leaves copies of a document where it is reasonable to presume that persons will pick up copies and may seek to act on them will be communicating them.

PERG 8.6.5 G RP

The Financial Promotion Order contains an exemption for mere conduits in article 18. It does not follow that all persons who provide services for facilitating the distribution of financial promotions are communicating. Where persons of this kind would normally be unaware of the fact that they may be distributing financial promotions or are indifferent as to whether they are doing so, or both, they will not be regarded as communicating them. This may, for example, include:

  1. (1)

    postal services providers;

  2. (2)

    telecommunication services providers;

  3. (3)

    broadcasting services providers;

  4. (4)

    courier services providers;

  5. (5)

    persons employed to hand out or disseminate communications;

  6. (6)

    a newsagent who sells newspapers and journals containing financial promotions.

In other cases, persons of this kind may need to rely on the mere conduit exemption (see PERG 8.12.18 G).

Website operators

PERG 8.6.6 G RP

Where a website operator provides links to other sites he is not usually to be regarded as causing the communication of the contents of those other sites to persons who may use the links. See further guidance on Internet issues in PERG 8.22.

Application of exemptions to persons causing a communication

PERG 8.6.7 G RP

A general point arises about causing and communicating on whether a particular exemption that applies to a communication made by a specified person also applies to a person who is causing that communication to be made. For example, article 551 of the Financial Promotion Order (Communications by members of professions)1 applies only to a communication by an exempt professional firm.1 This exemption may apply where a person ('P') requests an exempt professional firm ('E') to1communicate an1 offer to a client of E.1 In this case, where P causes E1 to communicate, it is the FCA's view that the exemption that applies to E1 will also apply to P. This is because, as ‘communicate’ includes ‘causing to communicate’, the exemption applies where P causes the communication of the financial promotion by 1E.

1 1 1 1 1 1 1 1 1 1
PERG 8.6.7A G RP

1The position of an unauthorised person (‘U’) who, in the course of business, causes an authorised person to communicate a financial promotion is somewhat different. This is because the authorised person (‘A’) is not subject to section 21 of the Act and so will not necessarily be communicating the financial promotion in circumstances in which an exemption would apply. To avoid any doubt about the application of section 21 to U, a specific exemption is provided in article 17A of the Financial Promotion Order (Communications caused to be made or directed by unauthorised persons). This exemption applies where U causes A to make or direct a real time financial promotion. It also applies to a non-real time financial promotion but only where the content is prepared by A. This means that U will remain subject to section 21 where, for example, he provides A with copies of a financial promotion for the purpose of A distributing them to other persons or where he is placing an advertisement in a publication issued by A.

Application of exemptions to persons who communicate on behalf of others

PERG 8.6.8 G RP

Another general point arises about the scope of exemptions that apply only to financial promotions by a particular person. This is whether the exemption applies to the communication of a financial promotion by an unauthorised person on behalf of the person to whom the exemption applies. In the FCA's view, this will not be the case unless the exemption specifically states that it applies to a communication made on behalf of the person identified in the exemption. For example, article 62 (Sale of body corporate) applies to 'any communication by or on behalf of a body corporate'.

Meaning of 'made to', 'directed at' and 'recipient'

PERG 8.6.9 G RP

Section 21(1) of the Act refers only to the communication of an invitation or inducement. It says nothing about communications being 'made to' or 'directed at' persons or about who the 'recipient' of a communication will be. These facts are determined by the following sequence:

  1. (1)

    section 21(13) of the Act indicates that communications are 'made';

  2. (2)

    article 6 of the Financial Promotion Order (Interpretation: communications) indicates that communications are made by being 'addressed to' a person;

  3. (3)

    article 6 then indicates that communications may be addressed:

    1. (a)

      to a particular person or persons whether verbally or in a legible form (for example, in a telephone call or letter) – these are referred to as communications which are 'made to' persons; or

    2. (b)

      to persons generally (for example, in a television broadcast or on a website) – these are referred to as communications which are 'directed at' persons;

  4. (4)

    article 6 also indicates that a recipient of a communication is the person to whom the communication is made, or, in the case of a non-real time communication directed at persons generally, anyone who reads or hears the communication.

PERG 8.6.10 G RP

In the FCA's opinion, the matters in PERG 8.6.9 G have the following effects.

  1. (1)

    Any one particular communication will either be real time or non-real time but not both. This is because:

    1. (a)

      a real time communication is one made in the course of an interactive dialogue (see PERG 8.10.2 G for guidance on the meaning of real time);

    2. (b)

      those exemptions which concern real time communications apply only to communications which are made to persons and not those which are directed at persons;

    3. (c)

      a communication is made to a person where it is addressed to him specifically;

    4. (d)

      the persons to whom a real time communication is addressed are those persons who take part in the interactive dialogue; and

    5. (e)

      where a communication is addressed to a particular person or persons it is not made to anyone else who may read or hear it.

    This means that a real time communication cannot also be a non-real time communication made to persons other than those to whom it is addressed. But it is possible for the same communication to be issued in different forms. For example, the text of a real time financial promotion may be made available to persons generally in writing intending to persuade or incite them to engage in investment activity. In that case, the written version will be a separate non-real time financial promotion which will need to be approved or exempt. A similar situation may arise where a real time financial promotion made during a meeting is recorded on video and then made available to the public. Also, a person may, in the course of an interactive dialogue with a particular person, address an invitation or inducement to others who may be present. Where this does not result in an interactive dialogue taking place with those other persons, the invitation or inducement will be a separate non-real time communication.

  2. (2)

    A communication in the form of a letter or e-mail addressed to a particular person is not made to anyone else who, legitimately or otherwise, may read it. For example, it will not be made to any persons to whom it is copied unless any invitation or inducement that may be in it is addressed also to those persons.

  3. (3)

    A communication in the form of a personal conversation or telephone call will not be communicated to anyone else who may eavesdrop or otherwise listen to the conversation.

  4. (4)

    The recipient of a communication to whom it is addressed, will not always be the person who physically receives it. As a communication under section 21 is an invitation or inducement to engage in investment activity, it will be addressed to the person or persons (P) who is or are being invited or induced. An invitation or inducement may be communicated to someone such as a friend or relative of P who is asked to pass it on. If so, the communication will be regarded as addressed to P and not to the friend or relative. The same will usually apply where an invitation or inducement is communicated to P’s adviser or other agent. However, this will not always be the case. The communication made to the agent may be aimed at getting him to act in a particular way. For example, to exercise discretion on his client’s behalf. In this case, the communication may be an invitation or inducement to the agent himself to engage in investment activity, In the FCA's view, the friend, relative or agent should not himself be regarded as communicating the invitation or inducement simply because he faithfully relays the message to P. This is provided that the friend, relative or adviser, in relaying the message, does not make his own invitation or inducement. Friends and relatives would not, in any case, be communicating in the course of business. Should agents be making their own financial promotions in relaying messages, it is likely that the exemptions for one-off financial promotions in articles 28 and 28A of the Financial Promotion Order will apply.

  5. (5)

    It is important to consider whether any particular financial promotion is 'made to' or 'directed at' persons as some exemptions in the Financial Promotion Order apply only to financial promotions which are made to persons.