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Newsroom & speeches
172/99
28 October 1999
Small companies will find it easier to access capital from 'business angels' under new proposals announced by the Chancellor Gordon Brown today.
In the second consultation document on Financial Promotion, under the new Financial Services and Markets Bill, the Government proposes to lighten the touch of regulation where companies are attempting to gain access to funding from sophisticated and high net worth private individuals - so called 'business angels'.
Announcing the proposals at the UK Internet Summit, the Chancellor said:
"The City of London is one of the largest and highly regarded financial centres in the world. It is vital that we develop a regulatory regime to enable its continued growth and to promote innovation and development in an increasingly technological age.
"This paper demonstrates our commitment to helping start up companies in the information technology and other rapidly growing business sectors gain access to capital."
The consultation document proposes an exemption for certain promotions to allow capital raising, in the form of shares or debentures, for small companies to individuals with:
The UK has looked at the regulatory regimes in the US and Australia where 'business angels' have played an important part in financing business start-ups.
However, to ensure adequate protection for the 'business angels' the consultation document proposes that the promoter must disclose a number of important facts to potential investors including:
The Financial Promotion consultation paper proposes legislation which is designed to embrace the technological revolution and to keep up with increasing technological change in financial services, whilst maintaining appropriate levels of consumer protection and facilitating consumer choice. This paper is the second part of a two stage process begun in March this year. Today's paper includes a draft statutory instrument for comment by interested parties.
The promotion rules proposed by the Government in this paper reflect new opportunities offered by the Internet. By including the exemptions in secondary legislation, the Government will be able to keep them up to date as technology develops, and to respond to EU and wider international developments.
1. The Financial Services and Markets Bill (FSMB), was introduced to Parliament on 17 June 1999 (Treasury news release 98/99 and 99/99). It establishes a single statutory regulatory system in place of the existing separate arrangements for different sectors. One aspect of this is to bring the regulation of promotion of investments, investment services, insurance and banking into a single regime.
2. The first consultation document on proposals relating to financial promotion was issued on 17 March 1999 (Treasury news release 49/99).
3. Except where the promotion is approved by an authorised person or an exemption applies, the Financial Services and Markets Bill proposes that financial promotion can only be undertaken by an authorised person. Exemptions under existing legislation are currently given in particular circumstances where regulation is not appropriate, e.g. for certain advertisements in connection with employee share schemes or advertisements to certain professional investors. The consultation document sets out the Treasury's proposed new approach to exemptions under the financial promotion regime in the FSMB.
4. Responses should be sent by 28 January to:
Regulatory Reform Team
HM Treasury
Parliament Street
London
SW1P 3AG
5. The consultation document and draft statutory instrument can be accessed on this site. Non-media printed copies are available, free of charge, from 0171 270 4848.
6. Media enquiries and requests for copies of the Financial Promotion consultation document should be addresses to Charles Keseru or Deborah Done in the Treasury Press Office on 0207 270 5188 and 0207 270 5222.
