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).
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:
When you’re raising funds from investors, these objectives matter because the FCA’s financial promotion rules exist exactly for these reasons:
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.
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:
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.
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.
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:
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:
They must sign a declaration confirming their status.
This applies to companies, partnerships, and trusts meeting these financial thresholds:
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:
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.
This exemption covers groups, networks, or associations made up entirely (or mainly) of certified high-net-worth or self-certified sophisticated investors. This includes:
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.
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.
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:
The safe approach
If you’re raising, and you ensure:
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:
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.
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:
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.
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.
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