The Financial Services Act 1986 (Investment Advertisements) (Exemptions) (No. 2) Order 1988

Citation and Commencement

1.  This Order may be cited as the Financial Services Act 1986 (Investment Advertisements) (Exemptions) (No. 2) Order 1988 and shall come into force on the day after the day on which it is made.

Interpretation

2.  In this Order and in the Schedule 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); and

“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.

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 the Schedule 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 the Schedule 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 the Schedule 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% 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.

Industrial and provident societies

8.  Section 57 of the Act shall not apply to an investment advertisement which, before the day on which section 160 of the Act comes into force, 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.

Advertisements required or authorised under enactments

9.  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.

Francis Maude

Parliamentary Under Secretary of State,

Department of Trade and Industry

5th April 1988