Lobbying leads to reinstatement of high net worth and sophisticated investor eligibility thresholds

New Government legislation implementing a number of amendments to financial promotion exemptions has been updated after concerns over the unintended impact of the changes.

Concerns centred on how the increase in thresholds for eligibility as a high net worth individual (HNWI) or sophisticated investor (SI) would disproportionately impact certain groups such as women, younger professionals, ethnic minorities, and those living outside London, by creating barriers to participation in the investment scene for those who are already marginalised. This would then have knock-on effects on levels of investment available, impacting fund managers and investee companies during one of the most difficult fundraising markets since the banking crisis.  

These concerns led to intense lobbying and petitions, including some signed by Mills & Reeve staff and partners, which resulted in certain provisions of the new legislation, Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) (No.2) Order 2023, being replaced by the Financial Services and Markets Act 2000 (Financial Promotion) (Amendment and Transitional Provision) Order 2024.

The latest legislation reinstates a number of the previous eligibility thresholds for HNWI’s and SI’s, including:

  1. Reverting the previous financial thresholds for the HNWI exemption back to £100,000 (annual income threshold) and £250,000 (net assets).
  2. Reinstating the previous criteria / thresholds for the SI exemption of having made two or more investments in an unlisted company within two years and reverting the threshold for the company directorship requirement to having been a director of a company with an annual turnover of at least £1m in the last two years.

The new form of investor statements for HNWI’s and SI’s implementing these changes are set out in the latest legislation. Investor statements signed by investors prior to these changes coming into force (ie. in the current form) will remain valid for a transitional period until 31 January 2025.

As the financial promotions regime remains under the spotlight, further changes to exemptions may be on the horizon.

Legislative references

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