7.3.1 Background

The Financial Services and Markets Act 2000 (FSMA) and related legislation, provides the legal and regulatory framework for the financial services sector in the UK. The Act created the Financial Services Authority as the regulator for insurance, banking and investment business. This body was succeeded by the FCA which focuses on regulating the consumer financial services sector in the UK, with other powers transferred to the Prudential Regulation Authority and the Bank of England.  The FCA is also the registrar of mutual societies; a responsibility which is unrelated to its duties as a regulator. 

Among many other things, FSMA sets out the legal and regulatory requirements covering a range of activities, including the offer of securities, such as shares and bonds. There are three main requirements to be aware of: what constitutes a regulated activity, and therefore falls within the scope of FSMA; the restrictions on financial promotions, that is, how investment opportunities are promoted or communicated to the general public; and the requirements to publish an FCA-approved prospectus. FSMA also sets out a range of exemptions and exclusions from these requirements, some of which apply to co-operative and community benefit societies issuing community shares. 

Exemption from the prospectus requirements does not imply exemption from the financial promotion requirements. So, for instance, a community benefit society issuing transferable share capital is exempt from the prospectus requirements but not from the financial promotions requirements. These matters are explained in more detail below.

 

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