3.1 The new exemption from the financial promotion regime introduced as part of the FSMA Two-Year Review is set out in Article 72 of The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the ‘Financial Promotion Order’), as accompanied by guidance issued by the Treasury which may be found at in Article 72 is attached in Annex A.
3.2 FSMA contains a prohibition on all persons, in the course of business, communicating an invitation or inducement to engage in investment activity unless they are authorised, or the content of the communication is approved by an authorised person, or they are exempt by way of order made by the Treasury. The exemption for employers applies to group personal pension schemes and to stakeholder pension schemes which are offered by employers to their employees.
The exemption applies to all kinds of promotion, both to ‘non-real time’ and to ‘real time’ promotions (broadly written and oral promotions). Promotions may only be made by employers who, in accordance with Treasury guidance, should ensure that those making the promotions are knowledgeable and competent to do so.
Treasury guidance also clarifies that employers should aim to avoid straying into providing specific financial advice tailored to the individual circumstances of particular employees, and should instead aim to provide more general information. This might include generic advice which relates to a number of different types of employee rather than to individuals per se.
3.3 This new exemption was accompanied by a number of safeguards for employees. Employers are required to make a financial contribution to the pensions they are promoting, and the size and nature of that contribution in respect of the employee in question must be disclosed.
Employers are not able to receive any direct financial benefit from making promotions, such as a commission. Written promotional material needs to include a statement informing the employee of their right to seek advice from an authorised person or appointed representative.
3.4 Under the FSMA regime, whenever a pension is taken up by an employee there should always be an FSA-authorised person involved somewhere in the process. This authorised person would be subject to FSA conduct of business rules and, as a result of their involvement, the employee may also have access to the Financial Ombudsman Service and to the Financial Services Compensation Scheme.
Chapter 1 Extending Employers Freedom – Introduction
Chapter 2 Responding to the Consultation
Chapter 3 FSMA Two-Year Review Exemption
Chapter 4 Pensions Promotions to Employees
Chapter 5 Promoting Insurance Products
Chapter 6 Employee Share Schemes and Plans
Chapter 7 Partial Regulatory Impact Assessment
Chapter 7A Options – Legislate or Not
Annex A Current Pensions Exemption
Annex B Current Insurance Exemptions
Annex C Proposed New Legislation
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