The Private Capital Series | Marshall Sterling Investment Management

Module 10.9 · The Investor Gateway

If you have been researching the financial promotion regime in preparation for a capital raise, you will have encountered references to the investor gateway. It is one of the more significant structural changes to the financial promotion landscape in recent years, and it affects anyone who is not FCA-authorised but wants to communicate financial promotions to retail investors, including those categorised as high net worth or sophisticated.

This article explains what the gateway is, what it requires, and what it means for founders and SME owners running a private fundraise.

The Background

Prior to January 2024, any FCA-authorised firm could approve a financial promotion for an unauthorised business, provided the communication met the FCA’s standards for financial promotions set out in COBS. There was no specific permission required to carry out this approval function. An authorised firm simply needed to satisfy itself that the communication was fair, clear and not misleading and was willing to take responsibility for it.

This created a market for financial promotion approval that operated with limited oversight. Some authorised firms were approving promotions with insufficient scrutiny, and in some cases firms were approving promotions for high-risk investments that were being targeted at retail investors who were not well placed to understand or absorb the risks involved. The FCA identified this as a significant source of consumer harm and introduced the gateway as the mechanism for addressing it.

What the Gateway Is

The investor gateway, which came into force on 7 February 2024, is a requirement that any FCA-authorised firm wishing to approve financial promotions for unauthorised persons must have specific FCA permission to do so. This permission is not automatically granted to all authorised firms. It must be applied for, and the FCA will assess whether the firm has the competence, systems and controls to carry out the approval function responsibly.

The practical effect is that the pool of firms able to approve financial promotions for unauthorised businesses has narrowed significantly. Firms that were previously approving promotions as a matter of course, without a specific permission, can no longer do so. Founders who previously relied on informal approval arrangements with authorised contacts may find those arrangements are no longer available.

There is a limited exemption from the gateway requirement for firms approving promotions for companies within the same corporate group, and for certain categories of appointed representative. But for most founder-led businesses seeking external approval of their investor communications, the gateway applies in full.

Why It Matters for Founders Using the HNW and Sophisticated Investor Exemptions

A point of confusion worth addressing directly: the gateway requirement applies to the approval route, not to the exemption route. If you are communicating financial promotions under the Article 50A high net worth exemption or the Article 50 sophisticated investor exemption, you are not using the approval route. You are relying on the FPO exemptions directly. The gateway does not add a new requirement on top of the exemption conditions.

The gateway is relevant to you in two specific circumstances. First, if you have communications that do not fall within any FPO exemption and you therefore need them approved by an authorised person. Second, if you are considering using a platform or intermediary that operates by approving your promotions rather than by providing an exemption framework for your equity fundraising.

The Approval Process Under the Gateway

For founders who do need to use the approval route, the gateway has changed what the process looks like in practice.

Firms with the gateway permission are subject to enhanced obligations when approving promotions for unauthorised businesses. They must assess the promotion against the FCA’s standards, satisfy themselves that it is fair, clear and not misleading, consider whether it is being targeted at an appropriate audience, and maintain ongoing monitoring of the promotion after approval. They are also required to have a written agreement with the unauthorised business covering the terms of the approval arrangement.

The result is that approval takes longer, costs more, and involves more substantive engagement with the content of your fundraising documents than was previously the case. Timelines that might previously have been measured in days are now more likely to be measured in weeks for a first engagement with a new approving firm. If you are planning to use the approval route, building that timeline into your fundraising process is essential.

The Interaction With the FPO Exemptions

Even where you are primarily relying on the FPO exemptions for your investor communications, the gateway changes are worth understanding because they affect the broader landscape in which your raise takes place.

Platforms and networks that facilitate connections between businesses and investors operate in a variety of ways. Some operate under their own FCA permissions and exemptions. Some approve promotions on behalf of the businesses using them. Some provide an infrastructure within which businesses communicate directly with investors under the FPO exemptions. The gateway affects platforms in the second category.

More broadly, the gateway reflects the FCA’s direction of travel on financial promotions. The regulator has been consistently tightening its oversight of how high-risk investments are communicated to retail investors, including those categorised as sophisticated or high net worth. The exemptions remain available, but the FCA’s expectation is that they will be used responsibly, with genuine attention to whether investors are appropriately categorised and whether the communications they receive are accurate and balanced. Marshall Sterling Investment Management recommends founders treat investor verification and exemption compliance as a core part of their raise preparation rather than an afterthought.

What Changed for Existing Approval Arrangements

Firms that were already approving financial promotions for unauthorised businesses before the gateway came into force on 7 February 2024 were given a transitional period to apply for the gateway permission. During this period they could continue approving promotions while their application was pending. That transitional period has now ended.

If you have an existing arrangement with an authorised firm for approval of your investor communications, and you have not recently confirmed that the firm holds the gateway permission, it is worth doing so. An approval provided by a firm that does not hold the permission is not a valid approval for the purposes of section 21. Communications approved in those circumstances remain unlawful financial promotions.

The FCA’s Broader Expectations

The gateway sits within a broader set of FCA expectations around financial promotions that have been articulated through supervisory communications, Dear CEO letters, and enforcement action in recent years. The FCA has been explicit that it views the financial promotion regime as a consumer protection tool, not a bureaucratic formality, and that it expects firms involved in approving or communicating promotions to take that function seriously.

For founders, the practical implication is that the regime is being actively enforced and the FCA is paying attention to how investments are being marketed to retail investors in the private markets. This is not a reason to avoid raising capital from private individuals. The exemptions exist precisely to facilitate that activity. It is a reason to approach compliance with genuine care rather than treating it as a box-ticking exercise.

The FCA publishes a list of financial promotions it has required to be amended or withdrawn, and it issues regular warnings about unauthorised firms and unlawful promotions. These publications are publicly accessible and serve as a reminder that enforcement in this area is real and ongoing.