Approving finproms – HMT confirms details of new gateway regime
HM Treasury has published a Consultation Response paper, following its July 2020 consultation, “Regulatory framework for approval of financial promotions”.
What's the background?
On 22 June 2021, HM Treasury (HMT) published a Consultation Response paper, following its July 2020 consultation, "Regulatory framework for approval of financial promotions" (the CP).
In the CP, HMT put forward two options for the introduction of a gateway though which authorised firms would have to pass if they wanted to be able to approve the financial promotion of an unauthorised person. These were:
restricting approval of such financial promotions through the imposition of requirements by the FCA; or
specifying the approval of such financial promotions as a 'regulated activity' under FSMA.
For more information on these options, see our summary of the CP here.
What has HMT decided?
As the consultation response confirms, HMT has chosen to proceed down the first of these routes.
When the gateway is in place, a prohibition - in the form of the imposition of a Financial Promotion Requirement on the firm's permission - will prevent all new and existing authorised firms from approving the financial promotions of unauthorised persons.
Where a firm wants to approve financial promotions, it will have to apply to the FCA, using a variation of requirement (VREQ) application, in order to have the prohibition removed (either in whole or in part).
HMT also intends to bring in a transitional period to allow an orderly transition between the two regimes and this will be in three phases:
First, there will be a pre-transition period application window, during which all authorised firms can continue to approve promotions and those firms that want to continue to approve financial promotions under the new regime can apply to do so;
Second, the transitional period itself, during which firms that have submitted an application will be able to continue approving financial promotions pending the outcome of their application; and
Finally, at the end of the transitional period, the new regime will take over and only authorised firms that have had the Financial Promotion Requirement cancelled or varied will be able to approve financial promotions.
What happens next?
HMT intends to bring forward the necessary legislation "when parliamentary time allows".
The FCA will consult on its proposals for implementing the gateway "in due course".
