What is Financial Promotion?

Whether you are seeking to raise finance for your Company through investment by third parties including friends and family, professional investors and/or alternative sources such as crowdfunding it is likely you will be required to obtain a Section 21 sign off.

A Section 21 sign off is required by law under the Financial Services and Markets Act 2000 (FSMA 2000). It is a complex piece of legislation governing documents used by companies to market their investments. It defines a ‘financial promotion’ as “‘an invitation or inducement to engage in investment activity, communicated by a person in the course of business, whether written or oral.”

The main aim of the legislation is to protect investors. Failure to comply with the legislation is a criminal offence and can incur a fine, up to two years in prison and unlimited financial liability to investors.

General Rules

If you are not regulated and ‘authorised’ by the FCA then you are not an ‘authorised person’. Only firms authorised by the FCA can issue or approve communications which amount to financial promotions.

Unregulated collective investment schemes (UCIS) cannot be promoted to the general public unless the financial promotion is approved by an authorised person or benefits from an exemption in the Financial Promotion Order.

In addition, the content of the financial promotion needs to be ‘fair, clear and not misleading’.

How can Blue Water Capital & Compliance Help?

As an authorised person we can issue and approve financial promotions for the purposes of Section 21 of the FSMA 2000. From verifying your existing financial promotion to preparing the complete financial promotion, we can assist you to distribute your documents to potential investors.