Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) (No. 2) Order 2023

Lord Sharkey Excerpts

Wednesday 13th December 2023 Grand Committee

[Lord Sharkey (LD)]

My Lords, let me say at the outset that we support this statutory instrument and the two that are to follow—but we do have some questions and comments. I note that, last week, the Commons debated all three instruments together, as one group. Why have the Government chosen to take a different approach in this House by splitting the debate into two sections? What does this signify, if anything?

Dealing with the instrument before us, we believe that it contains relatively uncontroversial and appropriate updates to existing legislation, following on from the TSC’s recommendations as made in its report on the collapse of London Capital & Finance in June 2021, as the Minister noted. The committee said that the FPO

“would benefit from reform due to the increasing risks associated with the exemptions that allow customers to self-certify as high net worth or sophisticated”.

It continued:

“The Treasury should—as a matter of priority—re-evaluate the Financial Promotion Order exemptions to determine their appropriateness and consider what changes need to be made to protect consumers”.


That was two and a half years ago. Perhaps the Minister could explain why it has taken so long to address the TSC’s recommendation. It is obvious that the risks addressed by the TSC continue to increase, as even a cursory glance at the inviting investment ads on any Tube train will show.

Some questions arise directly out of the consultation carried out by the Treasury in preparation for the SI. Angel investors had some doubts about raising the high net worth thresholds. They noted that raising the thresholds

“could reduce the potential for broadening angel network participation, including among less represented groups such as women and ethnic minorities. They also raised concerns that lower angel investor participation in the future could reduce SME investment, particularly for younger start-ups”.

I would be grateful if the Minister could tell us why these worries were discounted, particularly for the SMEs.

The consultation report also noted that

“many responses provided suggestions for improvements to the investor statements to ensure greater investor engagement. These included adding additional risk warnings and positive frictions, to encourage investors to engage meaningfully”.

These suggestions appear not to have been taken up by HMT. Can the Minister tell us why that is?

We also note that, in its third report, the SLSC encourages HMT to reassess the thresholds contained in this instrument on a more timely basis, as the Minister has mentioned. It is 18 years since the thresholds were last updated. Why cannot the Government agree to a regular—say, quinquennial—change to smooth out the boundary changes? In closing, I confirm again our support for the clearly necessary updates proposed by this SI.

[Lord Livermore (Lab)]

My Lords, we agree with these regulations, but I will ask the Minister just one question, which follows on from the final question of the noble Lord, Lord Sharkey. As the Minister said in her opening remarks, the exemptions to the financial promotions regime were last substantively updated in 2005, nearly 20 years ago. Given current high inflation rates, and the fact that prices have already risen nearly 5% since the January 2023 data used to reset the thresholds in this instrument, these new figures could arguably be said to be already out of date. I note what the Minister said in her opening remarks, but can I push her to provide at least an approximate timeframe for when the thresholds are likely to be reviewed again?