Section 21 approvers under fire: the FCA tightens the gatekeeper test

The FCA has put financial promotion approvers on notice. A review of ten authorised firms that approve promotions for unauthorised businesses found that while the strongest were embedding the Consumer Duty from the outset, others were waving through adverts with unsubstantiated claims, exposing retail investors to material aimed at professionals, and outsourcing judgement to third-party templates (FCA). One firm has already been forced into remediation and websites have been blocked to retail customers as a direct result of the work (FCA).

A gatekeeper regime that is no longer theoretical

The Section 21 approver regime - under which FCA-authorised firms check that promotions from unauthorised businesses comply with the rules before they can legally be marketed to UK consumers - came into force on 7 February 2024 (FCA). Two years in, the FCA is using its first substantive review to define the standard of care it expects. The sectors sampled - Buy Now Pay Later, crowdfunding and corporate finance - are precisely the areas where promotional reach is widest and retail harm potential highest (FCA). The message to boards is that holding the permission is not a passive revenue line; it is an active supervisory exposure.

The Consumer Duty as a structural test, not a checklist

Lucy Castledine, director of consumer investments at the FCA, said: "Consumers see these promotions daily - in social media feeds, online adverts, websites and apps. When approvers fail in their responsibilities, people can be misled into harmful financial decisions" (FCA). The framing matters. By anchoring the review in the Consumer Duty and singling out firms that applied it "from the start of their processes", the FCA is treating approval not as a compliance sign-off but as a product governance function (FCA). That recasts the internal stakeholder map: legal and compliance can no longer own the approver permission alone; distribution, marketing oversight and the Consumer Duty champion all need a documented role in the chain.

Commercial consequences for approver-as-a-service models

For the cohort of firms that built businesses around approving promotions for third parties, the economics are shifting. Reliance on third-party templates - flagged explicitly by the FCA as a failure point - has been the operating model that made the service scalable (FCA). If supervisors expect firm-specific substantiation and audience controls on every promotion, the unit cost of approval rises and the margin compresses. Expect some authorised firms to exit the activity, narrow their client lists to sectors they understand, or reprice. Unauthorised promoters in BNPL, crowdfunding and corporate finance should plan for fewer approvers, longer turnaround times and more intrusive due diligence on their own claims.

Board-level read-across

Castledine added: "Firms must make sure every promotion they sign off is fair, clear and not misleading" (FCA). The FCA has signalled it will continue to monitor compliance and hold firms to account (FCA). Senior managers holding the relevant prescribed responsibility should expect questions on three things: how the firm evidences substantiation of claims it has approved; how it controls audience targeting where promotions cross from professional to retail channels; and how it satisfies itself that template-driven approvals meet the same standard as bespoke ones.

The Section 21 permission has moved from a quiet line of business to a board-level risk. Firms that cannot demonstrate a Consumer Duty-anchored approval process should be deciding now whether to invest in one or hand the permission back.