What is a financial promotion and when do the rules apply to founders?
By SuLe · Updated 4 May 2026
A financial promotion is a communication, made in the course of business, that invites or induces someone to engage in investment activity — including buying shares in your startup. Section 21 of the Financial Services and Markets Act 2000 makes communicating one a criminal offence unless you are FCA-authorised, an authorised firm approves it, or an exemption applies. The rules apply to founders, not just to funds.
Key facts
- Section 21 FSMA 2000 restricts any "invitation or inducement to engage in investment activity" made in the course of business.
- Two elements define a promotion: a business communication, and an invitation or inducement to invest — both must be present.
- The rule is medium-neutral: decks, emails, websites, demo-day pitches, LinkedIn posts and DMs can each be a financial promotion.
- Breach is a criminal offence carrying up to two years' imprisonment, and the agreement can be unenforceable against the investor under section 30 FSMA.
- Compliance routes are: authorisation, approval by an authorised firm, or an exemption in the Financial Promotion Order 2005.
What actually counts as a financial promotion?
A communication is a financial promotion if it is made in the course of business and it invites or induces someone to engage in investment activity. Buying shares or a convertible in your company is investment activity, so an offer to invest is caught.
Both elements matter. A private, non-business chat is outside section 21; so is a genuinely factual update that carries no invitation to invest. It is the combination — business communication plus investment invitation — that triggers the restriction.
"Inducement" is broad. You do not need the words "invest now" — anything designed to lead the reader towards putting money in, including a warm "here are our terms, interested?", can qualify.
Does the medium matter?
No — section 21 is medium-neutral, and the FCA has been explicit that its guidance applies in full on social platforms. A pitch deck, an email, a website page, a demo-day slide, a LinkedIn post and a one-to-one direct message can all be financial promotions.
That means you cannot escape the rules by using an informal channel or a short format. "It was just a story" or "it's only 280 characters" is not a defence; each post or message stands alone as a promotion and must satisfy the rules on its own.
The practical upshot: the same offer that would need an exemption in a printed prospectus needs an exemption in a tweet. [More: What are the legal risks of pitching my raise on LinkedIn or social media?]
When do the rules bite for a founder?
The moment you move from describing your company to inviting investment in it. Telling the world you exist, what you do and how you are growing is ordinary marketing; inviting people to buy your shares is a regulated act.
Founders often assume the regime is only for banks and funds. It is not — section 21 catches communications made in the course of any business, and raising equity for your own company is in the course of business.
There is no small-company carve-out that lets you promote freely just because you are early-stage. If anything, the exemptions you will rely on are strict, which is why founders take advice on which one fits before they send a deck.
How do I stay on the right side of the line?
There are three lawful routes: be authorised (rare for startups), have the promotion approved by an authorised firm, or fit an exemption in the Financial Promotion Order 2005. Most founders use exemptions or an authorised platform.
The main exemptions cover certified high-net-worth individuals and certified or self-certified sophisticated investors. Each requires the prescribed signed statement, collected before you promote to that person, plus the required risk warnings and records on file. Because getting the category or paperwork wrong can turn a routine raise into a criminal exposure, confirm the route with a solicitor rather than self-assess.
| Communication | In the course of business? | Invites/induces investment? | Financial promotion? |
|---|---|---|---|
| "We launched our app today" | Yes | No | No |
| Coffee chat: "how's the company?" | Not really business, no offer | No | No |
| Deck sent to an angel setting out your share terms | Yes | Yes | Yes — needs exemption/approval |
| "DM me to buy shares" post | Yes | Yes | Yes — needs exemption/approval |
| Campaign on an FCA-authorised platform | Yes | Yes | Yes — but lawfully approved/communicated |
Worked example
Tom runs a climate-hardware startup and drafts two messages. The first, to his mailing list, reads "We've deployed our first 50 units — here's what we learned." No invitation to invest, so it is a factual update.
The second is a deck headed "Invest in our £600k round — 20% discount for early cheques." That is plainly a financial promotion: a business communication inducing investment. Tom cannot simply email it to his contacts.
Instead he sends the deck only to investors who have first signed the relevant high-net-worth or sophisticated-investor statement, with the required risk warnings, and files each certificate. For a public campaign he uses an authorised platform. He runs the categorisation past a solicitor before anything goes out.
Where founders go wrong
Thinking the rules are only for funds
— section 21 catches founders raising for their own company just as much as regulated firms.Believing a casual channel is exempt
— a DM or a short post is as much a promotion as a prospectus.Dressing an offer up as an "update"
— if the substance invites investment, the label does not save it.Collecting certificates afterwards
— the signed statement must be on file before you promote to that person, not once they are interested.
Related questions
Is a pitch deck a financial promotion?
It can be. If the deck invites or induces someone to invest — for example by presenting the terms of a share or convertible offer — it is a financial promotion under section 21 FSMA. A purely factual company overview with no investment invitation is less likely to be, but the line is fact-sensitive.
Do the rules apply to a founder, or only to funds?
They apply to founders too. Section 21 catches any communication made in the course of business, and inviting people to buy shares in your own company is caught. You are not exempt simply because you are the company raising the money rather than a regulated fund.
What makes a communication a financial promotion?
Two elements: it is made in the course of business, and it invites or induces someone to engage in investment activity — such as buying shares or a convertible. If both are present, section 21 applies regardless of the medium, from a website to a single direct message.
Are factual company updates caught?
Generally not. A genuinely factual update — traction, hiring, a product launch — with no invitation or inducement to invest usually falls outside section 21. The risk arises when the update is really a wrapper for "come and invest in us".
How do founders comply?
Either the promotion is approved by an authorised firm, or it falls within an exemption — most commonly the high-net-worth or sophisticated-investor routes with signed statements collected first — or it goes out through an FCA-authorised platform. Take advice on which applies before you communicate. [More: Can I publicly advertise that my startup is raising money?]
Whether a particular deck, email or post is a financial promotion is a fact-sensitive legal judgement — and getting it wrong is a criminal risk, not a compliance footnote. A SuLe solicitor can tell you which of your communications are caught and how to bring your raise within an exemption. Book a free call before you promote your raise and get clarity before you send anything.
Keep reading: Can I publicly advertise that my startup is raising money? · Who counts as a high-net-worth or sophisticated investor? · What are the legal risks of pitching my raise on LinkedIn or social media? · Can anyone invest in my startup, or are there investor eligibility rules? · How does equity crowdfunding work legally in the UK?
Primary sources: Financial Services and Markets Act 2000, section 21 · Financial Promotion Order 2005 · FCA — Financial promotions and adverts
