Guide
Section 21 FSMA: the restriction, and the offence
Updated
The whole regime hangs off one sentence of statute. It is worth reading the sentence rather than a summary of it.
What the section says
Section 21(1) FSMA 2000: a person must not, in the course of business, communicate an invitation or inducement to engage in investment activity. Subsection (2) disapplies that where the person is authorised, or the content is approved for the purposes of section 21 by an authorised person. Subsection (2A) adds that approval is valid only if it is permitted under section 55NA (approval with FCA permission) or falls within an exemption conferred by regulations under section 55NB.
- Territorial reach: section 21(3) applies the restriction to communications originating outside the UK only if they are capable of having an effect in the UK.
- Course of business: section 21(4) lets the Treasury specify by order when a person is, or is not, to be regarded as acting in the course of business.
- Exemptions: section 21(5) lets the Treasury specify circumstances in which the restriction does not apply. That power produced the Financial Promotion Order 2005.
- Engaging in investment activity: section 21(8) means entering or offering to enter an agreement that constitutes a controlled activity, or exercising rights conferred by a controlled investment. Section 21(9) and (10) define controlled activity and controlled investment by reference to the specified kinds.
Where cryptoassets come in
Qualifying cryptoassets were added to the list of controlled investments in Schedule 1 to the Financial Promotion Order with effect from 8 October 2023. Paragraph 26F defines a qualifying cryptoasset as any cryptoasset which is fungible and transferable, subject to exclusions for things that are already controlled investments, electronic money, fiat currency, digitally issued fiat currency, and certain closed-loop tokens.
One drafting point catches people out. Sub-paragraph (2)(b) says a cryptoasset is treated as transferable where a communication made in relation to it describes it as being transferable or conferring transferable rights. Your own marketing copy can therefore bring a token inside the definition.
The offence
Section 25: a person who contravenes section 21(1) is guilty of an offence and liable, on summary conviction, to imprisonment for up to six months or a fine not exceeding the statutory maximum, or both; and on conviction on indictment, to imprisonment for up to two years or a fine, or both. The FCA puts the same point in its own words: promotions not made using one of the four routes breach section 21, which is a criminal offence punishable by up to two years' imprisonment, an unlimited fine, or both.
Section 25(2) provides two defences: that the accused believed on reasonable grounds that the content was prepared or approved for the purposes of section 21 in accordance with section 21(2A) by an authorised person, or that the accused took all reasonable precautions and exercised all due diligence to avoid the offence.
Section 25 was last checked against the version of FSMA 2000 shown on legislation.gov.uk as up to date with all changes known to be in force on or before 15 August 2026.