The Financial Services Act 1986 (Investment Advertisements) (Exemptions) (No. 2) Order 1995

Citation and Commencement

1.  This Order may be cited as the Financial Services Act 1986 (Investment Advertisements) (Exemptions) (No. 2) Order 1995 and shall come into force on 19th June 1995.

Interpretation

2.  In this Order and in the Schedules hereto—

“the Act” means the Financial Services Act 1986;

“the 1985 Act” means the Companies Act 1985(1);

“the 1986 Order” means the Companies (Northern Ireland) Order 1986(2);

“EEA State” means a State which is a Contracting Party to the Agreement on the European Economic Area signed at Oporto on 2nd May 1992(3), as adjusted by the Protocol signed at Brussels on 17th March 1993(4), but until that Agreement comes into force in relation to Liechtenstein does not include the State of Liechtenstein;

“private company”, in relation to a body corporate which is a company within the meaning of the 1985 Act, means a private company within the meaning of section 1(3) of the 1985 Act and, in relation to a body corporate which is a company within the meaning of the 1986 Order, means a private company within the meaning of article 12(3) of the 1986 Order; and

“relevant EEA market” means a market in an EEA State which is established under the rules of an investment exchange specified in Part I of Schedule 1 to this Order or which meets the criteria specified in Part II of that Schedule.

Investment advertisements issued for the purpose of promoting or encouraging industrial or commercial activity or enterprise

3.—(1) Section 57 of the Act shall not apply to an investment advertisement issued or caused to be issued by a body corporate of the kind described in paragraph (2) below which—

(a) relates to shares in or debentures of a private company;

(b) contains no invitation or information which would make it an investment advertisement other than an invitation or information which it is reasonable to expect a person engaged in an activity of the kind described in that paragraph to give in the course of engaging in that activity; and

(c) complies with the requirements of paragraph (3) of this article.

(2) A body corporate falls within this paragraph if—

(a) it is a body corporate which has as its principal object or one of its principal objects the promotion or encouragement of industrial or commercial activity or enterprise in the United Kingdom or in any particular area of it or the dissemination of information concerning persons engaged in such activity or enterprise or requiring capital in order to become so engaged; and

(b) it has no direct or indirect pecuniary interest in any matters which are the subject of any investment advertisement it issues which is exempt by virtue of this article or in any investment agreement which may be entered into following such an advertisement.

(3) The requirements referred to in paragraph (1)(c) of this article are that the advertisement should contain the following statements presented in a manner which, depending upon the medium through which the advertisement is issued, are calculated to bring the contents of the statements prominently to the attention of recipients of the advertisement—

“Investment in new business carries high risks, as well as the possibility of high rewards. It is highly speculative and potential investors should be aware that no established market exists for the trading of shares in private companies. Before investing in a project about which information is given, potential investors are strongly advised to take advice from a person authorised under the Financial Services Act 1986 who specialises in advising on investments of this kind.

The persons to whose order this advertisement has been issued have taken reasonable steps to ensure that the information it contains is neither inaccurate nor misleading..”

Take-overs of private companies

4.—(1) In this article and in Schedule 4 to this Order—

(a) the expressions “debentures” and “shares”, when used—

(i) in relation to a body corporate which is a company within the meaning of the 1985 Act have the same meaning as in that Act;

(ii) in relation to a body corporate which is a company within the meaning of the 1986 Order have the same meaning as in that Order; and

(iii) in relation to any other body corporate, mean investments falling within paragraph 1 or 2 of Schedule 1 to the Act issued by that body corporate; and

(b) “relevant offer” means an offer of the kind described in Part II of Schedule 4 to this Order for shares in or debentures of a body corporate of the kind described in Part III of that Schedule.

(2) Section 57 of the Act shall not apply to an investment advertisement if it falls within paragraph (3), (4), or (5) below.

(3) An investment advertisement falls within this paragraph if—

(a) it is issued in connection with a relevant offer;

(b) it fulfils the conditions specified in Part IV of Schedule 4 to this Order; and

(c) it contains no invitation or information which would make it an investment advertisement other than—

(i) an invitation or information relating to a relevant offer; or

(ii) an invitation or information relating to a relevant offer and an invitation or information relating to an offer for investments falling within paragraph 4 or 5 of Schedule 1 to the Act which confer an entitlement or rights with respect to shares or debentures which are the subject of that relevant offer.

(4) An investment advertisement falls within this paragraph if—

(a) it either accompanies or is issued after the issue of an investment advertisement which contains a relevant offer and which falls within paragraph (3) above; and

(b) it contains no invitation or information which would make it an investment advertisement other than an invitation or information relating to investments falling within paragraph 4 or 5 of Schedule 1 to the Act which confer an entitlement or rights with respect to shares or debentures which are the subject of that relevant offer.

(5) An investment advertisement falls within this paragraph if it is issued in connection with a relevant offer and is a form of application for shares or debentures or for investments falling within paragraph 4 or 5 of Schedule 1 to the Act.

Sale of body corporate

5.—(1) In this article—

(a) “a group of connected individuals”, in relation to the party disposing of shares in a body corporate, means persons each of whom is, or is a close relative of, a director or manager of the body corporate and, in relation to the party acquiring the shares, means persons each of whom is, or is a close relative of, a person who is to be a director or manager of the body corporate;

(b) “close relative” means a person’s spouse, his children (including, in Northern Ireland, his adopted children) and step-children, his parents and step-parents, his brothers and sisters, and his step-brothers and step-sisters and includes a person acting in the capacity of trustee or personal representative of any such relative; and

(c) “single individual” includes two or more persons acting in their capacity as the personal representatives of a single individual.

(2) Section 57 of the Act shall not apply to an investment advertisement if the invitation is made or the information is given by or on behalf of a body corporate, a partnership, a single individual or a group of connected individuals for the purposes of or with a view to the acquisition or disposal of shares in a body corporate other than an open-ended investment company between parties each of whom is a body corporate, a partnership, a single individual or a group of connected individuals, being shares which—

(a) consist of or include shares carrying 75 per cent or more of the voting rights attributable to share capital which are exercisable in all circumstances at any general meeting of the body corporate; or

(b) would, together with any shares already held by the person or persons by or on whose behalf the advertisement is issued, carry not less than that percentage of those voting rights.

Dealings in course of non-investment business

6.  Section 57 shall not apply to an investment advertisement issued or caused to be issued by a person who holds a permission granted under paragraph 23 of Schedule 1 to the Act if the only reason why the advertisement would be subject to the provisions of section 57 of the Act is because it contains an invitation or information given for the purposes of or in connection with anything done in accordance with the terms and conditions of the permission.

Advertisements issued to persons of particular kinds

7.—(1) In this article “relevant person” means a person who is not an authorised person and who is not unlawfully carrying on investment business in the United Kingdom.

(2) Section 57 of the Act shall not apply to an investment advertisement issued or caused to be issued by a relevant person in circumstances in which either—

(a) it is contained in a copy of a publication being a copy which is issued to a particular person by reason of his having placed an advertisement in that publication; or

(b) it is issued to a person whose business it is to place, or arrange for the placing of, advertising and who is sent the advertisement for the purposes of that business.

Advertisements directed at informing or influencing persons of a particular kind

8.—(1) Section 57 of the Act shall not apply to an investment advertisement to which it would, apart from this article or other applicable exemption, otherwise apply if the advertisement may reasonably be regarded as being directed at informing or influencing only persons who fall within any one or more of the following categories—

(a) a government, local authority or public authority;

(b) persons whose ordinary activities involve them, as principal or as agent, in acquiring, holding, managing or disposing of investments for the purposes of a business carried on by them or whom it is reasonable to expect will, as principal or agent, acquire, hold, manage or dispose of investments for the purposes of such a business;

(c) persons whose ordinary business involves the giving of advice which may lead to another person acquiring or disposing of an investment or refraining from so doing; and

(d) persons whose ordinary business involves making arrangements with a view to another person acquiring or disposing of investments.

(2) For the purposes of paragraph (1) of this article—

(a) the expression “government, local authority or public authority” has the meaning given in Note (1) to paragraph 3 of Schedule 1 to the Act; and

(b) an advertisement may be regarded as directed at informing or influencing a person of a kind specified in paragraph (1) if it is addressed to some other person in his capacity as an employee of that person, and, for these purposes, employment includes employment otherwise than under a contract of service.

9.—(1) For the purposes of article 8 of this Order, each of the following is an indication that an advertisement is directed at informing or influencing persons of a kind specified in paragraph (1) of that article—

(a) the advertisement expressly states that it is directed at persons of a kind specified in article 8(1) of this Order and that it would be imprudent for persons of any other kind to respond to it;

(b) the advertisement expressly states that any investment or service to which it relates is available only to persons having professional experience in matters relating to investment;

(c) the manner in which the advertisement is disseminated is such that it is unlikely to come to the attention of persons who are not professionally experienced in matters relating to investment; and

(d) any invitation or information contained in the advertisement is unlikely to appeal to persons who do not have professional experience in matters relating to investment.

(2) None of the indications given in paragraph (1) above is to be taken as showing conclusively that an advertisement is directed as there mentioned and, equally, the fact that an advertisement contains none of those indications is not to be taken to indicate that it is not so directed.

10.—(1) For the purposes of article 8 of this Order, each of the following is an indication that an advertisement is directed at informing or influencing persons of a kind not specified in paragraph (1) of that article—

(a) the advertisement concerns an investment which is likely to be of interest mainly to persons acting in their personal capacity;

(b) the minimum amount which may be expended in order to enter into any transaction to which the advertisement relates is sufficiently small that it is unlikely to deter persons who do not have professional experience in matters relating to investment from responding to the advertisement; and

(c) the advertisement is a direct offer advertisement within the meaning given to that expression for the purposes of the core rules for the conduct of investment business(5).

(2) None of the indications given in paragraph (1) above is to be taken as showing conclusively that an advertisement is directed as there mentioned and, equally, the fact that an advertisement contains none of those indications is not to be taken to indicate that it is not so directed.

Advertisements required or permitted to be published by exchange or market rules

11.  Section 57 of the Act shall not apply to any advertisement relating to any investment falling within any of paragraphs 1 to 5 of Schedule 1 to the Act which is permitted to be traded or dealt in on a relevant EEA market or a market established under the rules of an investment exchange specified in Schedule 2 to this Order, if the advertisement consists of or of any part of a document which is required or permitted to be published by the rules of the relevant market, or by a body which regulates such a market or which regulates offers or issues of investments to be traded on such a market.

Advertisements by certain markets

12.  Section 57 of the Act shall not apply to an investment advertisement which is issued or caused to be issued by a market which is a relevant EEA market or is established under the rules of an investment exchange specified in Schedule 2 or 3 to this Order if the only reason why section 57 would otherwise apply to the advertisement is that it contains information which identifies a particular investment falling within paragraph 7, 8 or 9 of Schedule 1 to the Act as one which may be traded or dealt in on the market.

Industrial and provident societies

13.  Section 57 of the Act shall not apply to an investment advertisement which is issued or caused to be issued by an industrial and provident society with respect to investments falling within paragraph 2 of Schedule 1 to the Act which it has issued or proposes to issue.

Public offers of securities

14.  Section 57 of the Act shall not apply to an investment advertisement which—

(a) is a prospectus, or supplementary prospectus, issued in accordance with Part II of the Public Offers of Securities Regulations 1995(6);

(b) relates to a prospectus or supplementary prospectus published or to be published in accordance with Part II of the Public Offers of Securities Regulations 1995, and which contains no invitation or information which would make it an investment advertisement other than—

(i) the name and address of the person by whom the investments to which the prospectus or supplementary prospectus relates are to be offered (within the meaning of the Public Offers of Securities Regulations 1995), or other particulars for communicating with him;

(ii) the nature and the nominal value of the investments to which the prospectus or supplementary prospectus relates, the number offered and the price at which they are offered;

(iii) a statement that a prospectus or supplementary prospectus issued in accordance with Part II of the Public Offers of Securities Regulations 1995 is or will be available and, if it is not yet available, when it is expected to be; and

(iv) instructions for obtaining a copy of the prospectus or supplementary prospectus; or

(c) is required by a relevant EEA market for admission of an investment to trading on that market which—

(i) contains the information which would be required by Part II of the Public Offers of Securities Regulations 1995 if it were a prospectus; and

(ii) does not contain any information other than information required or permitted to be published by the rules of the relevant EEA market.

Advertisements required or authorised under enactments

15.  Section 57 of the Act shall not apply to an investment advertisement if its issue is required or authorised by or under any enactment other than the Act.

Revocations

16.  The Financial Services Act 1986 (Investment Advertisements) (Exemptions) (No. 2) Order 1988(7) and the Financial Services Act 1986 (Investment Advertisements) (Exemptions) (No. 2) Order 1992(8) are hereby revoked.

Derek Conway

Timothy Wood

Two of the Lords Commissioners of Her Majesty’s Treasury

14th June 1995