As covered in our previous update, new requirements relating to the promotion of certain investment types by unauthorised persons to high net worth and sophisticated individual investors have only recently been introduced. The exemptions in question are commonly used by unlisted companies when fundraising and targeting potential individual investors.

However, further legislation has now been made to reinstate the financial thresholds to be eligible for the high net worth individual exemption and the criteria to be eligible for the self-certified sophisticated investor exemption.

The explanatory memorandum accompanying the statutory instrument explains that the technology, angel investing, and theatre sectors raised new concerns that the changes to the eligibility criteria for the exemptions could affect the ability of start-up businesses to obtain investment, and the ability to finance theatre productions through small-scale investors.

What remains?

The changes made by the instrument can be summarised as: 

  • reducing the financial thresholds to be eligible for the high net worth individual exemption to: 
    • income of at least £100,000 in the last financial year; or 
    • net assets of at least £250,000 throughout the last financial year; and 
  • amending the criteria to be eligible for the self-certified sophisticated investor exemption by: 
    • reinstating the criterion of having made two or more investments in an unlisted company in the previous two years; and 
    • reducing the company turnover required to satisfy the “company director” criterion to £1 million.

Timeline and transition 

The new statutory instrument will come into force on 27 March 2024.

Investor statements that comply with the original January 2024 changes will remain valid until and including 30 January 2025, although will have no effect for any purpose after that date.

The last word?

The FCA has itself reiterated that the UK’s definition of a high net worth investor is an international outlier, with a far lower threshold than comparable jurisdictions. The latest changes are unlikely to be the last word on finding the balance between minimising the risk of consumer harm and encouraging a positive environment for investment.