Appendix 1: Financial promotions and investment recommendations

• Appendix 1: Financial Promotions and Investment Recommendations (PDF, 184 KB) Updated December 2024

(Television broadcasters should refer to Rule 9.35 in Section Nine of the Broadcasting Code. Radio broadcasters should refer to Rule 10.13 in Section Ten of the Broadcasting Code.)

1. This appendix sets out the relevant provisions referred to in Rules 9.35 and 10.13 of the Broadcasting Code, Ofcom’s guidance (where applicable) on how compliance with these provisions may be achieved, and the legislation underpinning broadcasters’ obligations in respect of financial promotions and investment recommendations.

2. Broadcasters wishing to communicate financial promotions and investment recommendations are strongly encouraged to seek independent legal advice to ensure their understanding of, and compliance with, the Broadcasting Code, these provisions, and the underlying legislation. Broadcasters may also wish to consider the Financial Conduct Authority (“FCA”) perimeter guidance on financial promotions and investment recommendations.

3. If a person is regulated by the FCA because of their activity in financial promotions, producing investment recommendations or disseminating investment recommendations produced by a third party, they will be subject instead to rules of the FCA.

Financial promotions

Financial Promotion Restriction

Statutory Framework

4. The following are key aspects of the legislation underpinning broadcaster’s obligations in respect of financial promotions. As noted at paragraph 2 above, Broadcasters are strongly encouraged to seek independent legal advice to ensure their understanding of, and compliance with, the Broadcasting Code, these provisions, and the underlying legislation.  Broadcasters may also wish to consider the FCA perimeter guidance on financial promotions.

5. Section 21 of the Financial Services and Markets Act 2000 (“FSMA 2000”) provides that a person must not, in the course of business, communicate an invitation or inducement to engage in investment activity, or to engage in claims management activity. ("the financial promotion restriction").

6. Article 17 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (“the 2005 Order”) provides that the financial promotion restriction does not apply to any communication which:

• • does not identify (directly or indirectly) a person who provides the controlled investment to which the communication relates; and
  • does not identify (directly or indirectly) any person as a person who carries on a controlled activity in relation to that investment; and
  • does not identify (directly or indirectly) and person as a person who carries on a controlled claims management activity.

7. Article 20 provides a further exception to the financial promotion restriction in respect of communications by journalists (“Article 20 exception”).

8. Article 20A of the 2005 Order provides a further exception in respect of promotions broadcast by a company director or employee of a company (“Article 20A exception”).

Exception in respect of communications by journalists (Article 20 exception)

Statutory Framework

9. Article 20 of the 2005 Order provides that the financial promotion restriction does not apply to any non-real time communication if:

1. 1. the content of the communication is devised by a person acting in the capacity of a journalist;
   2. the communication is contained in a qualifying publication as defined by paragraphs 1 and 2 of Article 54 of The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (“the 2001 Order”); and
   3. in the case of a communication requiring disclosure, one of the following conditions is met:

1. 1. 1. the communication is accompanied by an indication explaining the nature of the author’s financial interest or that of a member of his family; or
      2. the authors are subject to proper systems and procedures which prevent the publication of communications requiring disclosure without the explanation referred to in i. above; or
      3. the qualifying publication in which the communication appears falls within the remit of the Code of Practice issued by the Press Complaints Commission, the Ofcom Broadcasting Code, or the Producers’ Guidelines issued by the British Broadcasting Corporation.

10. Article 54 of the 2001 Order provides that a qualifying publication is:

• • a newspaper, journal, magazine or other periodical publication; or
  • a regularly updated news or information service; or
  • a television or radio broadcast or transmission

As long as the principal purpose of the publication is not to advise a person on the merits of, or lead or enable a person to buy, sell, subscribe for or underwrite a particular investment which is a security or a contractually based investment.

Disclosure requirement:

11. Article 20(3) of the 2005 Order provides that a disclosure requirement applies where:

• • the author of the communication or a member of their family is likely to obtain a financial benefit or avoid a financial loss if people act in accordance with the invitation or inducement contained in the communication; and
  • the communication relates to a controlled investment e., shares or options, futures, or contracts for differences relating to shares, within the meaning of Article 20(4) of the Order or to a controlled claims management activity; and
  • the communication identifies directly a person who issues or provides the controlled investment or who carries on or engages in the controlled claims management activity to which the communication relates.

12. Article 20 of the 2005 Order provides that where a disclosure requirement applies, the communication must be accompanied by an indication explaining the nature of the author’s financial interest or that of a member of his family.

13. Article 20 also provides that the disclosure requirement under the legislation does not apply where:

• • the authors are subject to proper systems and procedures which prevent the publication of communications requiring disclosure without the indication referred to above; or
  • the qualifying publication in which the communication appears falls within the remit of the Code of Practice issued by the Press Complaints Commission, the Ofcom Broadcasting Code, or the Producers’ Guidelines issued by the British Broadcasting Corporation.

Guidance

18. Article 20 of the 2005 Order does not specify the way in which a financial interest should be disclosed, however Ofcom notes that the FCA considers that a financial interest should be disclosed in a way that will enable recipients to understand readily its nature. For example, “the writer has a substantial holding of traded call options in these shares”.  Accordingly, Ofcom considers that a financial interest should be disclosed in a clear, transparent, and easily understood way.

19. The effect of the Article 20 exception, and the provision set out at paragraph 13 above, is that a journalist will not breach the financial promotion restriction by not disclosing a financial interest, providing that the publication, service, or broadcast concerned operates proper systems and procedures. What constitutes proper systems and procedures will depend on all the circumstances of a particular case.  However, Ofcom notes that the FCA indicates in its guidance that proper systems and procedures may achieve the objective of preventing the publication of communications without the required disclosure in one of two ways:

• • They may require that disclosure may be made; or
  • They may seek to prevent broadcasters from acting in a way which would enable them to profit if persons followed their published recommendation e.g., by banning their dealing in the shares or related investments for a reasonable period following the promotion, thereby ensuring that the journalist will not have a financial interest to disclose.

20. Ofcom adopts the FCA’s guidance that a service or broadcast may be likely to satisfy the requirement for proper systems and procedures if it has set up procedures:

• • for persons responsible for devising the content of financial promotions, or for deciding that they should be included in the service or broadcast, to register their financial interests in a central log which is properly maintained and regularly reviewed;
  • for all financial promotions to be subject to review before broadcast by an appropriately qualified and senior person; and
  • for the persons referred to in point 1 to be made aware in writing of the procedures and of their obligations to disclose their financial interests or to refrain from taking any course of action which may be likely to give them a financial interest requiring disclosure and, preferably, to have confirmed their acceptance of these procedures and obligations in writing.

Promotion broadcast by company director etc. (Article 20A exception)

Statutory Framework

21.Article 20A of the 2005 Order provides that the financial promotion restriction does not apply to a communication which is communicated as part of a qualifying service, by a person who is a director or employee of an undertaking, where the communication:

• • invites or induces the recipient to acquire a controlled investment of the kind falling within article 20(4) of the 2005 Order which is issued by the undertaking or another undertaking in the same group or an authorised person in the same group; and
  • comprises words which are spoken by the director or employee and not broadcast, transmitted or displayed in writing or is displayed in writing only because it forms part of an interactive dialogue to which the director or employee is a party and in the course of which the director or employee is expected to respond immediately to questions put by a recipient of the communication; and
  • is not part of an organised marketing campaign; and
  • is accompanied by an indication that the director or employee is a director of employee of the undertaking.

22. Article 20A(2) provides that a qualifying service is a service which is:

• • broadcast or transmitted in the form of television or radio programmes; or
  • displayed on a website (or similar system for the electronic display of information) comprising regularly updated information

As long as the principal purpose of the service taken as a whole (including any advertisements and other promotions contained within it) not to advise a person on the merits of, or lead or enable a person to buy, sell, subscribe for or underwrite a particular investment which is a security or a contractually based investment.

Guidance

23. As per FCA perimeter guidance, the main purpose of the exception for promotions broadcast by company directors appears to be to guard against the possibility that, during the course of a broadcast interview or a live website presentation, a financial promotion is made inadvertently by a director or employee of a company or other business undertaking when that person is not acting as a journalist.

24. The Article 20A exception specifically precludes any form of written communication. However, the FCA states in its perimeter guidance that it understands that the Treasury did not intend to prohibit the use of written words in the form of subtitling, which may be an aid to those with hearing difficulties or to interpret a foreign language, or the use of captions which supplement a spoken communication by highlighting aspects of it without introducing anything new.

25. The FCA also indicate in their guidance that whilst they cannot fetter their discretion and must consider all potential breaches on their merits, where the only potential breach is in relation to the use of subtitling or captioning in the above way, the FCA would not expect to take further action.

Investment recommendations

Statutory Framework

26. The following are key aspects of the legislation underpinning broadcasters’ obligations in respect of investment recommendations. As noted at paragraph 2 above, Broadcasters are strongly encouraged to seek independent legal advice to ensure their understanding of, and compliance with, the Broadcasting Code, these provisions, and the underlying legislation.  Broadcasters may also wish to consider the FCA perimeter guidance on investment recommendations.

27. The Financial Services and Markets Act 2000 (Market Abuse) Regulations 2016/680 (“Regulations 2016/680”) came into force on 3 July 2016. They gave effect to EU Regulation 596/2014 on market abuse (“Regulation 596/2014”), which is supplemented by Commission Delegated Regulation (EU) 2016/958 (“Regulation 2016/958”).  Regulations 596/2014 and 2016/598 are retained legislation which continue to apply following the UK’s exit from the European Union, and which impose requirements and standards on those who produce investment recommendations, or disseminate investment recommendations produced by a third party, through the media.

28. Article 20(1) of Regulation 596/2014 provides that persons who produce or disseminate investment recommendations or other information recommending or suggesting an investment strategy shall take reasonable care to ensure that such information is objectively presented, and to disclose their interests or indicate conflicts of interest concerning the financial instruments to which that information relates.

29. Regulation 2016/958 lays down regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest. However, articles 20 and 21 of Regulation 596/2014 provide that journalists who are subject to equivalent regulation in the UK or appropriate self-regulation, including where the Ofcom Broadcasting Code applies, are exempt from these standards provided that:

• • such regulation achieves similar effects to those achieved by the standards;
  • no advantage or profit from the disclosure or the dissemination of the information in question is derived, directly or indirectly, by the persons concerned or persons closely associated with them; and
  • the disclosure or the dissemination is not made with the intention of misleading the market as to the supply of, demand for, or price of financial instruments.

30. The following provisions are intended to achieve similar effects to the standards laid down in Regulation 2016/958.