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Recent changes to the UK financial promotions regime

Posted on 14 May 2024

In a move that acknowledged the concerns of the tech and investment community, particularly the potential barriers for women and other underrepresented groups in accessing capital, HM Treasury announced a rollback of certain financial promotion regime changes as part of the Spring Budget 2024.

Previously, we discussed how the financial promotions regime in the UK was set to change from 31 January 2024, affecting both companies seeking funding and angel investors. The revisions had updated the criteria for high net worth and self-certified sophisticated investor exemptions, aligning them with inflation and modern investment practices.

However, the Government listened to feedback about the unintended consequences of these changes, such as the risk of marginalising women investors and entrepreneurs, as well as those operating outside of London's established financial ecosystems. In response, the Treasury made significant adjustments.

Key among these adjustments was the reduction of the financial thresholds that could have disproportionately affected women, who statistically are less likely to meet higher income and asset criteria. The annual income requirement for a high-net worth individual investor was reduced from £170,000 back to £100,000, and the net assets condition was lowered from £430,000 back to £250,000.

For self-certified sophisticated investors, the changes were also notable. The turnover requirement for a director's company was decreased from £1.6 million back to £1 million. Importantly, a reinstated provision allows an individual to qualify as a self-certified sophisticated investor if they have made at least two investments in unlisted companies within the two years prior to signing their investor statement, with a declaration of the number of such investments made in that period. This is particularly relevant for women who are active in early-stage investments and may have been disadvantaged by the previous, more stringent criteria.

These amendments, which were effective from 27 March 2024, are part of the Financial Services and Markets Act 2000 (Financial Promotion) (Amendment and Transitional Provision) Order 2024 (SI 2024/301) ("the Order"). The Order not only revises the eligibility criteria for exemptions but also retains the updated format for investor statements introduced earlier in the year. Additionally, it ensures that investor statements conforming to the previous order will remain valid until 30 January 2025.

The Treasury's decision to revise these criteria is a positive step towards inclusivity, offering a more accessible pathway for women and minority investors to participate in the UK's vibrant capital raising landscape. Please do get in touch for detailed guidance on how these reversals affect fundraising efforts and the implications for updated investor statements.

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