Understanding financial promotion: What founders need to know

When you’re raising capital, whether that’s through your pitch deck, a LinkedIn post, or even a coffee chat with an investor, you’re entering a regulated space. 

In the UK, communicating an investment opportunity triggers the ‘financial promotions regime’, governed by the Financial Services and Markets Act 2000 (FSMA), the Financial Promotion Order 2005 (FPO), and overseen by the FCA.

Making a misstep can be serious, and even result in criminal charges, unenforceable investment agreements, fines, and major reputational damage for you and your company, so getting familiar with the rules around financial promotion is key. 

That might sound a little intimidating, but it doesn’t mean you can’t talk about your raise. It just means you need to make sure your promotion falls within one of the FCA’s recognised exemptions (which most legitimate startup raises do).

Why are the FCA concerned with financial promotions?

It might sometimes feel like the Financial Conduct Authority (FCA) are getting a little too involved when it comes to how you promote your raise - but it’s worth remembering what they’re there for, and how their oversight actually helps protect both founders and investors.

The FCA is the UK’s independent regulator for financial services and markets. Its role includes:

• Protecting consumers by ensuring people investing understand what they are getting into
• Promoting market integrity by keeping UK financial markets fair, efficient and transparent

When you’re raising funds from investors, these objectives matter because the FCA’s financial promotion rules exist exactly for these reasons:

• Investors need to receive fair, clear and not misleading communications
• The market should not be undermined by firms making unsound promises or broadcasting high-risk offers to people who cannot afford or understand them

In short: when you’re seeking investment, you’re part of the ecosystem that the FCA regulates. Understanding their rules will help you to avoid missteps.

What is a ‘financial promotion’?

When fundraising, almost everything you say about your company could fall under financial promotion. 

Under Section 21 of the Financial Services and Markets Act 2000 (FSMA), a financial promotion is any communication made “in the course of business” that invites or induces someone to engage in investment activity.

Essentially, if you’re saying or posting something that could encourage someone to invest in your company - even indirectly - it’s a financial promotion.

This covers a broad spectrum of communications, designed to catch any that could influence an investor’s decision.

This covers almost every type of fundraising interaction founders typically engage in - from formal pitch decks and investor updates to social media posts or casual conversations.

Here are some common examples of financial promotion: 

• A pitch deck that invites investment
• A LinkedIn post saying ‘investors wanted’ or ‘we’re raising’
• An email asking someone to subscribe or register interest for shares
• A casual conversation at a networking event (if it’s promoting investment in your business)

The legal framework: what you're navigating

1. FSMA Section 21

As previously mentioned, this states: 

‘A person must not, in the course of business, communicate an invitation or inducement to engage in investment activity…’

This doesn’t mean that all communications are immediately excluded (in which case it would be impossible to raise), rather unless the communication is made through one of the legal routes (authorisation, approval, exemption), it would be illegal.

2. Companies Act 2006 Section 755 - Private Company Public Offers

If you’re a private limited company, Section 755 prohibits offers of your shares to the public.

An offer to the public is defined in Section 756 as one that could result in shares being available to anyone beyond the intended recipients.

It’s key to note that even if your communication is lawful under FSMA, you must ensure it’s not a ‘public offer’ under the Companies Act.

Essentially, both of these are in place to govern who you communicate the investment opportunity to, and how broadly this is communicated.

Exemptions: when you can legally communicate an investment opportunity

The good news: there are many ways to promote your investment whilst staying compliant, by using specified exemptions (most of which you would be using anyway when raising investment). 

Let’s dive into the key exemptions as laid out in the FPO:

1. Certified high net worth individuals (Article 48)

This exemption recognises that some private investors have the financial means to make informed decisions about investing in early-stage companies without needing the same level of protection as the general public.

These are individuals who meet one or both of:

• Annual income over £100,000, or
• Net assets over £250,000 (excluding home, pensions, some liabilities)

They must sign a declaration confirming their status.

2. High net worth companies (Article 49)

This applies to companies, partnerships, and trusts meeting these financial thresholds:

• Companies with 20 or more members and share capital or net assets of at least £500,000.
• Companies with fewer than 20 members and share capital or net assets of at least £5 million.
• Unincorporated associations or partnerships with net assets of £5 million or more.
• Trustees of trusts with gross cash and investments of at least £10 million.

3. Self-certified investors (Article 50A)

This covers individuals who have sufficient experience or knowledge to understand and bear the risks of investing in unlisted companies. To qualify, they must sign a self-certification statement to confirm that at least one of the following applies:

• They are a member of a network or syndicate of business angels and have been for at least six months before the date of the statement.
• They work, or have worked within the past two years, in a professional capacity in private equity or in the provision of finance to small and medium-sized enterprises (SMEs).
• They are currently, or have been within the past two years, a director of a company with an annual turnover of at least £1 million.
• They have made two or more investments in unlisted companies in the last two years.

For both Article 48 and 50A exemptions, investors must provide a signed declaration confirming that they understand the risks - including that they could lose all the money they invest. 

As a founder, you can only rely on these exemptions if you have a reasonable belief that the individual genuinely meets the criteria. In practice, that means checking their declaration is complete, dated within the last 12 months, and keeping a copy for your records.

4. Associations of high net worth or sophisticated investors (Article 51)

This exemption covers groups, networks, or associations made up entirely (or mainly) of certified high-net-worth or self-certified sophisticated investors. This includes: 

• Business angel networks or syndicates
• Investment clubs that pool resources to back startups
• Private investor communities

One of the key conditions here is that the promotion must be made to or through the association, and that the association itself has declared that all its members are high-net-worth or sophisticated investors, and would qualify individually.

5. Investment professionals and institutions (Article 19)

These are all entities or individuals who are in the business of investing, generally members of VCs, corporate funds, or regulated funds who are deemed capable of making informed investment decisions.

6. Friends, family, and targeted communication

If you’re communicating in a private, targeted way - for example, to a small group of known people rather than publicly broadcasting - this may not class as being ‘in the course of business’, in a wider sense, so it may fall outside the restrictions under financial promotion.

Some other more niche exemptions (that may still apply) are: 

• Communications to Overseas Recipients (article 12 FPO)
• Communications caused to be made or directed by unauthorised persons where an authorised person prepared the content of the communication(article 17A)
• One-off non-real-time communications and solicited real-time communications (article 28) (must not be part of a marketing campaign)
• One-off unsolicited real-time communications (article 28A) (they must understand the risks)

What this means in practice for your startup

The safe approach

If you’re raising, and you ensure: 

• You share your investment opportunity only with high net worth individuals, sophisticated investors, or private investor networks
• You keep clear records of communication and self-certification signatures (if applicable)
• You stay factual in public updates by sharing milestones, growth news, or product wins (avoiding reference to investment opportunity)

For example, a compliant message would be ‘We’re raising under SEIS and speaking with certified high net worth, self-certified sophisticated, or professional investors - DM us to see if you qualify’

This kind of message is specific, targeted, and documented, meaning you are far less likely to fall foul of FSMA or FPO rules.

The risky approach

You’re at risk of making an unauthorised financial promotion (or even a public offer) if you:

• Post publicly on LinkedIn to advertise your raise and offer investment opportunities without caveats
• Email or message large, open audiences without confirming who qualifies under the exemptions.
• Share investment terms broadly, treating every follower or connection like a potential investor.
• Fail to verify or record who you’ve shared your raise with, or whether they’re eligible.
• Bypass authorised channels, making the offer directly to the public instead of using a regulated platform.

Even if your intentions are good, this kind of open communication can count as an unauthorised financial promotion, which could have repercussions for your business if flagged.

How to stay compliant: actionable advice for your startup

Before you start your fundraise, it's important to understand exactly who you’re speaking to and what you’d like to say. Make sure you know your audience and check that each person you contact for investment opportunities qualifies under one of the exemptions or is a professional investor.

You should also keep a record of everything. Store self-certification forms, written declarations, and notes on who you’ve spoken to, when, and what information you shared. This information is much easier to prove when you’ve kept a paper trail from the get-go.

Try and segment your communications carefully: 

• General company updates like new hires, milestones or partnerships are fine to share with a wider audience
• If you want to mention investment opportunities, funding rounds, or available shares, you should only go to people who fall under the relevant exemptions or be distributed through an authorised firm.
• If you’re relying on a specific exemption, explicitly state this in the communication or email with a caveat.

Also, think carefully about where and how you’re sharing information. If you plan to promote your raise in a public sphere, use a regulated fundraising platform or work with an FCA-authorised firm to approve your promotion first.

To summarise

Raising investment is an exciting prospect for any startup, but it comes with regulatory responsibilities that, if broken, can have serious consequences for the growth and success of your business. 

By understanding what counts as a financial promotion, carefully targeting comms to exempt or professional investors, keeping in-depth records, and using clear disclaimers or authorised platforms when needed, founders can confidently navigate the rules.

Staying compliant not only protects you from legal and financial consequences, but it also builds trust with investors and strengthens your company’s reputation.

Our team, content and app can help you make informed decisions. However, any guidance and support should not be considered as 'legal, tax or financial advice.'