Following a UK government consultation and the publication of its response to that consultation in November of last year, changes to certain of the financial promotions regime's exemptions came into effect yesterday (31 January 2024). 

The exemptions in question allow businesses to raise funds from certain individuals without the need to comply with the regulatory burden of the financial promotions regime. 

Any new financial promotion which seeks to rely on the exemptions will now need to abide by these amendments, regardless of whether the investors in question have been previously promoted to by the business.

What are the changes?

• The financial thresholds to qualify as a high net worth individual have been increased. Previously, an individual had to have an income of at least £100,000 in the last financial year or net assets of at least £250,000 throughout the last financial year. These thresholds are now £170,000 and £430,000 respectively
• The eligibility criteria for self-certified sophisticated investors have been amended. On the basis that the requirement for a self-certified sophisticated investor to have made more more than one investment in an unlisted company in the last two years is no longer suitable, this condition has been deleted; the reasoning being that it is now much easier for ordinary retail investors to invest in unlisted companies than it was in the past. 
• The financial thresholds for a company director to qualify as a self-certified sophisticated investor have been increased. Previously, this criteria was met if the company in question had an annual turnover of at least £1 million in the last two years; now, it is £1.6 million
• The paperwork to be given by high net worth individuals and self-certified sophisticated investors has also been amended, with the intention of improving the format and investor engagement and simplifying the wording, for example, by reducing legislative references
• The company seeking to issue a financial promotion is required to provide more detail about themselves in the communication than was previously the case, although given the information only comprises their address, registration details and contact information, this change shouldn't prove too onerous. 

It is important that both companies and individuals seeking to rely on the exemptions comply with the conditions in order not to fall foul of the financial promotions regime. 

If you have any questions about the changes or are considering utilising one of the exemptions (either as an investor or company), please contact a member of the Forsters' corporate team.