Financial Services and Markets Act 2000, section 21

Restrictions on financial promotion

Part II Regulated And Prohibited Activities

(1) A person (“A”) must not, in the course of business, communicate an invitation or inducement to

[F134 (a)F134] engage in investment activity [F135, or

(b)to engage in claims management activity.F135]

(2)But subsection (1) does not apply if—

(a)A is an authorised person; or

(b)the content of the communication is approved for the purposes of this section by an authorised person.

[F136 (2A)The content of a communication may be approved for the purposes of this section by an authorised person only if the giving of the approval—

(a)is permitted under section 55NA (which enables approval to be given with FCA permission), or

(b)falls within an exemption conferred by regulations under section 55NB.F136]

(3)In the case of a communication originating outside the United Kingdom, subsection (1) applies only if the communication is capable of having an effect in the United Kingdom.

(4)The Treasury may by order specify circumstances in which a person is to be regarded for the purposes of subsection (1) as—

(a)acting in the course of business;

(b)not acting in the course of business.

(5)The Treasury may by order specify circumstances (which may include compliance with financial promotion rules) in which subsection (1) does not apply.

(6)An order under subsection (5) may, in particular, provide that subsection (1) does not apply in relation to communications—

(a)of a specified description;

(b)originating in a specified country or territory outside the United Kingdom;

(c)originating in a country or territory which falls within a specified description of country or territory outside the United Kingdom; or

(d)originating outside the United Kingdom.

(7)The Treasury may by order repeal subsection (3).

(8) “Engaging in investment activity” means—

(a)entering or offering to enter into an agreement the making or performance of which by either party constitutes a controlled activity; or

(b)exercising any rights conferred by a controlled investment to acquire, dispose of, underwrite or convert a controlled investment.

(9)An activity is a controlled activity if—

(a)it is an activity of a specified kind or one which falls within a specified class of activity; and

(b)it relates to an investment of a specified kind, or to one which falls within a specified class of investment.

(10)An investment is a controlled investment if it is an investment of a specified kind or one which falls within a specified class of investment.

[F137 (10A) “Engaging in claims management activity” means entering into or offering to enter into an agreement the making or performance of which by either party constitutes a controlled claims management activity.

(10B) An activity is a “controlled claims management activity” if—

(a)it is an activity of a specified kind,

(b)it is, or relates to, claims management services, and

(c)it is carried on in Great Britain.F137]

(11)Schedule 2 (except paragraph 26) applies for the purposes of subsections (9) and (10) with references to section 22 being read as references to each of those subsections.

(12)Nothing in Schedule 2, as applied by subsection (11), limits the powers conferred by subsection (9) or (10).

[F138 (12A)Paragraph 25 of Schedule 2 applies for the purposes of subsection (10B) with the references to section 22 in sub-paragraph (3) of that paragraph being read as references to subsection (10B).F138]

(13) “Communicate” includes causing a communication to be made.

(14) “Investment” includes any asset, right or interest [F139 (including where an asset, right or interest is, or comprises or represents, a cryptoasset) F139] .

(15) “Specified” means specified in an order made by the Treasury.

Read section 21 in the full Act → Definitions (7) Cases (29)

Definitions used in section 21

Investment

(4) “Investment” includes any asset, right or interest (including where an asset, right or interest is, or comprises or represents, a cryptoasset) .

Defined in s.22(4) · see it in the full Act
claim

“claim”, in relation to the Financial Services Compensation Scheme under Part XV, is to be construed in accordance with section 214(1B);

Defined in s.417(1) · see it in the full Act
authorised person

“authorised person” has the meaning given in section 31(2);

Defined in s.417(1) · see it in the full Act

(2) In this Act “authorised person” means a person who is authorised for the purposes of this Act.

Defined in s.31(2) · see it in the full Act
financial promotion rules

“financial promotion rules” means rules made under section 137R ;

Defined in s.417(1) · see it in the full Act
Specified

(5) “Specified” means specified in an order made by the Treasury.

Defined in s.22(5) · see it in the full Act
claims management services

(1) In this Act “claims management services” means advice or other services in relation to the making of a claim.

Defined in s.419A(1) · see it in the full Act
cryptoasset

“cryptoasset” means any cryptographically secured digital representation of value or contractual rights that—

(a)

can be transferred, stored or traded electronically, and

(b)

that uses technology supporting the recording or storage of data (which may include distributed ledger technology).

Defined in s.417(1) · see it in the full Act

Cases considering section 21 (29)

The Financial Conduct Authority v Karen Ferreira

[2022] EWCA Civ 397 · 25 March 2022Interprets

Section 21(1) could not be treated as containing all the facts which establish a contravention. Its prohibition is read with the applicable statutory disapplications, so knowledge of the communication and its business character alone was insufficient. (see paras [31]-[34]; [36]-[40]) The absence of approval by an authorised person under section 21(2) is a factual circumstance that may be necessary to make a communication contravene section 21. A person alleged to be knowingly concerned must know that the potentially relevant disapplication does not operate. (see paras [31]-[40]) The court treated the Treasury’s power to specify further disapplications as part of the statutory setting for section 21. Potentially relevant disapplications form part of the factual inquiry into whether there was a contravention. (see paras [12]-[13]; [42]-[44])

Greaves & Ors v R

[2010] EWCA Crim 709 · 31 March 2010

The court treated the prohibition on unapproved communications inviting investment activity as an antecedent offence. The share-selling conspiracy under this provision did not itself exhaust the culpability of the transfer arrangements for its proceeds. (see paras [3]; [16]; [25]-[26])

4VVV Ltd & Ors v Nicholas Spence & Ors

[2024] EWHC 2434 (Comm) · 27 September 2024Defines

The court considered the restrictions on communicating invitations or inducements to engage in investment activity and applied them to the authorised marketing of the schemes. (see paras [597]-[600]) The Alpha Group companies caused marketing communications to be made which invited or induced potential investors to participate in the investment activity. (see paras [597]-[600]) The court treated causing EPL to send the communications as communication for the purposes of the provision. (see para [597]) The court treated entering or offering to enter into an agreement whose making or performance was a controlled activity as engaging in investment activity for the promotional prohibition. (see para [597])

9 more judgments, and what each says about section 21, are in the case-law panel in the full Act.

Explanatory note

58.This section prohibits unauthorised persons from issuing financial promotions, unless the content of the promotion is approved by an authorised person (who will be subject to rules made by the Authority), or unless an exemption applies.  The regulation of financial promotions under the Act is similar to the regulation of investment advertisements and cold-calling under the FS Act 1986.  However, section 21 reflects changing technologies and the fact that the borderline between advertisements and unsolicited calls has become blurred.  Sections 238 to 241 contain additional provisions relating to the promotion of collective investment schemes.

59.The prohibition applies to “invitations” or “inducements” to engage in investment activity, which are made in the course of business.  The Treasury are given power, if necessary, to determine the meaning of “in the course of business”.  The prohibition will potentially catch communications whether they are made in the United Kingdom, into the United Kingdom from elsewhere, or from the United Kingdom to another country.  Communications from outside the United Kingdom can potentially be caught only if they can have an effect in the United Kingdom (subsection (3)).  It is expected that the exemption order which the Treasury intends to make under subsection (5) will further limit the territorial application of the financial promotion regime, so that communications issuing from overseas will generally only be caught if they are directed at the United Kingdom.  This will be of particular significance in the context of internet communications.

60.Subsection (5) confers a power on the Treasury to make exemptions from the prohibition, similar to the power to make exemptions from the investment advertisement prohibition under the FS Act 1986.  It is possible for these exemptions to be made conditional on compliance with rules made by the Authority under section 145.

61.Subsection (6) makes clear that the circumstances that can be specified under subsection (5) extend to circumstances for which subsection (3) expressly makes provision.  Subsection (6) thus clarifies that an exemption can be made for communications which originate outside the United Kingdom even if they are capable of having an effect here.  Subsection (6)(a) and (b) deal expressly with the possibility of exemptions for communications originating in specific countries, or specific groups of countries such as EU countries.  Subsection (6)(d) would allow all communications originating overseas to be exempted if that became appropriate.  If such provision were made, subsection (7) would allow the Treasury to repeal subsection (3).

62.Subjections (8) to (12) govern what constitutes “engaging in investment activity”.  Subsections (9) and (10) give the Treasury power to determine the scope of the prohibition on financial promotion.  It is expected that “controlled activities” will be the activities which are regulated under the Act, together with activities which would be regulated, but for an exclusion in an order made under section 22(1).  This broad approach reflects the position under the FS Act 1986.

All the explanatory notes for the Act

Amendments and notes

21 notes from legislation.gov.uk

Amendments

  1. F134Words in s. 21(1) renumbered as s. 21(1)(a) (E.W.S.) (6.10.2018) by Financial Guidance and Claims Act 2018 (c. 10), ss. 27(3)(a)(i), 37(5); S.I. 2018/1045, reg. 2(a)
  2. F135S. 21(1)(b) and word inserted (E.W.S.) (6.10.2018) by Financial Guidance and Claims Act 2018 (c. 10), ss. 27(3)(a)(ii), 37(5); S.I. 2018/1045, reg. 2(a)
  3. F136S. 21(2A) inserted (6.9.2023 for specified purposes, 6.11.2023 for specified purposes, 7.2.2024 in so far as not already in force) by Financial Services and Markets Act 2023 (c. 29), ss. 20(2), 86(3) (with s. 20(5)); S.I. 2023/936, reg. 2(1)(a)(b)(2)(a)(ii)(3)(4) (with reg. 3)
  4. F137S. 21(10A)(10B) inserted (E.W.S.) (6.10.2018) by Financial Guidance and Claims Act 2018 (c. 10), ss. 27(3)(b), 37(5); S.I. 2018/1045, reg. 2(a)
  5. F138S. 21(12A) inserted (E.W.S.) (6.10.2018) by Financial Guidance and Claims Act 2018 (c. 10), ss. 27(3)(c), 37(5); S.I. 2018/1045, reg. 2(a)
  6. F139Words in s. 21(14) inserted (29.8.2023) by Financial Services and Markets Act 2023 (c. 29), ss. 69(2), 86(3); S.I. 2023/779, reg. 4(uu)

Modifications

  1. C75S. 21 modified by S.I. 2018/1149, reg. 58 (as inserted (1.3.2019) by The Financial Services Contracts (Transitional and Saving Provision) (EU Exit) Regulations 2019 (S.I. 2019/405), regs. 1(2), 3) (as amended by S.I. 2019/1010, regs. 1(3), 4; 2020 c. 1, Sch. 5 para. 1(1))
  2. C76S. 21 modified by S.I. 2018/1149, reg. 42 (as inserted (1.3.2019) by The Financial Services Contracts (Transitional and Saving Provision) (EU Exit) Regulations 2019 (S.I. 2019/405), regs. 1(2), 2)
  3. C77S. 21 modified (31.12.2020) by The Electronic Commerce and Solvency 2 (Amendment etc.) (EU Exit) Regulations 2019 (S.I. 2019/1361), regs. 1(2), 18 (as amended by S.I. 2019/1390, regs. 1(2), 6); 2020 c. 1, Sch. 5 para. 1(1)
  4. C78S. 21 modified (25.2.2026 for specified purposes) by The Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026 (S.I. 2026/102), regs. 1(2)(3), 60 (with regs. 53-56)
  5. C79S. 21(1) modified (31.10.2001) by S.I. 2001/3374, art. 1, Sch. para. 6
  6. C80S. 21(1) modified (31.10.2004) by The Financial Services and Markets Act 2000 (Transitional Provisions) (Mortgages) Order 2004 (S.I. 2004/2615), arts. 1(2)(b), 5, Sch. para. 6
  7. C81S. 21(1) modified (14.1.2005) by The Financial Services and Markets Act 2000 (Transitional Provisions) (General Insurance Intermediaries) Order 2004 (S.I. 2004/3351), arts. 1(2)(b), 5, Sch. para. 6
  8. C82S. 21(1) modified (6.4.2007) by The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2006 (S.I. 2006/1969), arts. 1(3), 7, Sch. para. 6
  9. C83S. 21(1) excluded (3.7.2002) by Welsh Development Agency Act 1975 (c. 70), Sch. 1 para. 21 (as substituted) by The Financial Services and Markets Act 2000 (Consequential Amendments) Order 2002 (S.I. 2002/1555), arts. 1, 6
  10. C84S. 21(1) excluded (29.6.2017 for specified purposes, 3.7.2017 for specified purposes, 31.7.2017 for specified purposes, 3.1.2018 in so far as not already in force) by The Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 (S.I. 2017/701), regs. 1(2)(3)(4)(6), 14(1) (with reg. 7)
  11. C85S. 21(2) modified (30.6.2008 for certain purposes, otherwise 1.1.2009) by The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No. 2) Order 2007 (S.I. 2007/3510), arts. 1(2), 8(1)(3)
  12. C86S. 21(2) modified (1.7.2009 for certain purposes, otherwise 30.6.2010) by The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2009 (S.I. 2009/1342), arts. 1(2), 34, {Sch. paras. 1, 3}
  13. C87S. 21(2) modified (26.7.2013 for specified purposes, 2.9.2013 in so far as not already in force) by The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No.2) Order 2013 (S.I. 2013/1881), arts. 1(2)(5), 59(3)
  14. C88S. 21(2) modified (E.W.S.) (29.11.2018 for specified purposes, 1.4.2019 in so far as not already in force) by The Financial Services and Markets Act 2000 (Claims Management Activity) Order 2018 (S.I. 2018/1253), arts. 1(2)(3), 83(5)

Commencement

  1. I2S. 21 wholly in force at 1.12.2001; s. 21 not in force at Royal Assent see s. 431(2); s. 21 in force for certain purposes at 25.2.2001 by S.I. 2001/516, art. 2(b), Sch. Pt. 2; s. 21 in force in so far as not already in force at 1.12.2001 by S.I. 2001/3538, art. 2(1)