UK Regulatory Gateway for Financial Promotions Applies from February 2024 | Shearman & Sterling LLP

The Financial Services and Markets Act 2023 (Commencement No. 2 and Transitional Provisions) Regulations 2023, made on August 22, 2023, bring into force certain provisions of the Financial Services and Markets Act 2023 and create a number of transitional regimes. We discuss the FSM Act in our client note, “A Boost for U.K. Financial Services: The U.K. Financial Services and Markets Act 2023.”

From February 7, 2024 the new regulatory gateway for the approval by authorized firms of financial promotions of unauthorized firms will apply. The FSM Act amends the Financial Promotion Restriction banning authorized firms from approving financial promotions of unauthorized firms unless they have received approval from the Financial Conduct Authority to have the prohibition removed in whole or part. In addition to bringing the gateway in from February 7, 2024, the 2nd Commencement Regulations provide that from September 6, 2023, provisions will apply that enable the FCA to give directions and guidance and to make rules will apply. In addition, from November 6, 2023, provisions will apply that allow the FCA to receive (but not determine) applications to approve financial promotions that are made during the application period. The application period begins on November 6, 2023 and ends February 6, 2024. Where an authorized firm applies for FCA approval during the application period or where a person communicates a communication approved by an authorized firm, under a transitional measure, the regulatory gateway provisions will not apply until the authorized firm’s application for approval is determined by the FCA or is withdrawn. HM Treasury is empowered to make regulations providing for exemptions from the requirement to pass through the regulatory gateway and has indicated that exemptions will be available for authorized firms approving financial promotions of unauthorized companies within their group and for principals approving financial promotions for their appointed representatives for regulated activities, for which the principal has agreed to accept responsibility.

The 2nd Commencement Regulations also provide for other transitional measures:

• The Prudential Regulation Authority launched a consultation in November 2022 on the implementation of reforms to the Basel Standards in its consultation paper, “Implementation of the Basel 3.1 standards.” The consultation included drafts of the PRA’s proposed rules. The FSM Act brought in additional regulatory accountability provisions, such as public consultation requirements, engagement with Parliamentary committee requirements and requirements on taking into account the new growth and competitiveness objective. The regulatory accountability provisions enter into force on August 29, 2023 under the Financial Services and Markets Act 2023 (Commencement No. 1) Regulations 2023, and would apply to the PRA in its making of rules or standards, or determining policy for the matters included in the PRA’s Basel reform consultation. The 2nd Commencement Regulations disapply the regulatory accountability mechanisms for the purposes of the PRA’s implementation of the Basel reforms.
• The FSM Act also amends provisions in the Financial Services and Markets Act 2000 that empower the regulators to impose conditions when approving an application for acquisition of control or an increase in control, over a UK-authorized firm. The amendment allows the regulators to approve such an application with conditions in order to advance that regulator’s objectives. The 2nd Commencement Regulations disapply that amendment for applications received by a regulator before August 29, 2023, which is when the amendment enters into force according to the FSM Act.

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