Financial promotions compliance is an area where payment firms frequently underestimate the regulatory requirements. The FCA has made clear that it views misleading or non-compliant promotions as a significant source of consumer harm, and enforcement action in this area has increased substantially. This guide covers the key rules and practical compliance steps for payment institutions and EMIs.
The Financial Promotion Restriction
Section 21 of the Financial Services and Markets Act 2000 creates the 'financial promotion restriction' — a general prohibition on communicating financial promotions unless the communication is made or approved by an authorised person, or falls within an exemption under the Financial Promotion Order 2005. A 'financial promotion' is broadly defined as an invitation or inducement to engage in investment activity or, since 2023, an invitation or inducement to engage in cryptoasset activity. For payment firms, this primarily covers marketing of payment services, electronic money products and — where relevant — cryptoasset services.
Breach of the financial promotion restriction is a criminal offence carrying up to two years' imprisonment and/or an unlimited fine. It also gives the FCA grounds for enforcement action, including fines, public censure and requirements to withdraw non-compliant promotions.
The Clear, Fair and Not Misleading Standard
The FCA's overarching standard for financial promotions is that they must be 'clear, fair and not misleading' (COBS 4.2 / BCOBS 2.2 / the Payment Services and Electronic Money Approach Document). This standard applies to all communications that are capable of constituting a financial promotion, including: website content; social media posts; email marketing; paid advertising (search, display, print); app store descriptions; agent and distributor marketing materials; and promotional materials at events or in physical locations.
Clear means that the information is presented in a way that is likely to be understood by the average member of the target audience. Technical jargon, complex fee structures or important limitations should not be obscured by marketing language. Fair means that the promotion does not emphasise potential benefits without also giving a fair and prominent indication of risks or limitations. Not misleading means that the promotion does not create a false or deceptive impression, whether by what it says, what it omits, or how it presents information.
Social Media and Digital Promotions
The FCA has published specific guidance on financial promotions in social media (FG15/4 and subsequent updates). Key points include: character limits on platforms like X (formerly Twitter) do not excuse non-compliance — if the essential information cannot be included within the character limit, the firm should use a different format or include a prominent link to a page containing the required disclosures; 'stories' and other ephemeral content formats are subject to the same rules as permanent content; influencer marketing arrangements must comply with both FCA rules and ASA/CAP codes — the firm is responsible for ensuring that any promotion communicated by a third party on its behalf is compliant; and user-generated content, retweets and shares can constitute financial promotions if they amount to communications by or on behalf of the firm.
Cryptoasset Financial Promotions
Since October 2023, the FCA's financial promotions regime has been extended to cover cryptoasset promotions under the Financial Promotion (Amendment) Order 2023. Firms communicating cryptoasset promotions to UK consumers must either be FCA-authorised, have the promotion approved by an FCA-authorised person, or be registered with the FCA under the cryptoasset financial promotions regime. The cryptoasset promotions rules include specific requirements for risk warnings, personalised risk summaries and cooling-off periods. The FCA has taken aggressive enforcement action in this area, issuing over 1,600 consumer alerts against firms and individuals promoting cryptoassets without proper authorisation or approval.
Practical Compliance Steps
Payment firms should implement a structured financial promotions compliance process that includes: a centralised review and approval process for all marketing materials before publication; clear accountability — a named individual (ideally a senior manager) responsible for financial promotions compliance; documented review criteria covering the clear/fair/not misleading standard, required disclosures, risk warnings and regulatory status statements; regular reviews of existing published materials (website, social media, app stores) to identify and update non-compliant content; training for marketing teams, agents and distributors on the financial promotions rules; and a process for monitoring third-party promotions (including agent marketing and affiliate/referral arrangements).
The FCA's approach to financial promotions enforcement has shifted from primarily reactive (responding to complaints) to proactive (systematic website reviews, social media monitoring and mystery shopping exercises). Firms should assume that their marketing materials will be reviewed by the FCA at some point and ensure that all published content meets the required standard.
Regulatory Counsel advises payment institutions and EMIs on financial promotions compliance, marketing review processes and FCA enforcement matters. Contact us for a free initial consultation. See our compliance monitoring page for more.
Frequently Asked Questions
An invitation or inducement to engage in investment activity or cryptoasset activity. It covers websites, social media, email marketing, advertising and all forms of promotional communication.
They must be clear, fair and not misleading. Benefits must not be emphasised without fair and prominent indication of risks or limitations.
No. If essential information cannot fit within the character limit, the firm should use a different format or include a prominent link to required disclosures.
Breach of the s21 restriction is a criminal offence carrying up to two years' imprisonment and/or unlimited fines. The FCA can also require withdrawal of promotions and impose regulatory penalties.