How to navigate financial promotions rules in employee share plan communications

Share plan communications are often exempt from the FCA’s rules around financial promotions. If you’re a company issuing share plans, this sounds like good news. It means you can inform employees about share plans without worrying about breaking the rules.

But it’s not quite as simple as that. This week we had the pleasure of hosting a webinar on this subject with our friends at Tapestry Compliance. Below is a summary of the topics we covered.

We break down the key rules, exemptions, and best practices you should follow to stay compliant – and look at why you might want to go beyond the legal requirements to deliver the best outcomes for both your employees and your business.

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Understanding the exemptions

The Financial Services and Markets Act (FSMA) restricts companies from certain activities without FCA authorisation. But employee share plans are an exception. This exemption allows businesses to promote these plans without falling under the FCA’s financial promotion rules – as long as they remain within specific guidelines.

It’s important to understand exactly where these exemptions apply – and where they don’t. For example, if the regulator felt a share plan communication advised employees to buy shares, it would fall outside the exemptions. Understanding the line between information and advice is key.

Similarly, communications directed towards non-employees, like consultants or non-executive directors, may not be exempt and could cause the entire share plan to breach the rules.

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Focusing on the best outcomes for your employees

The FCA’s rules are there for a reason – to protect the interests of investors and to deliver good outcomes. So shouldn’t issuers follow them regardless?

A key requirement is that communications are ‘fair, clear, and not misleading’. This goes beyond compliance. It’s about making sure all employees fully understand the plan and how it works.

Fair and clear means writing in plain English and avoiding jargon, so everyone can understand what you write.

Equally important is the mix of channels you use. For example, if you have employees who aren’t desk-based, you’ll need to think about using off-line channels to reach them. Don’t just rely on email.

It’s also important to consider accessibility. A mobile-optimised website will likely be more accessible than a PDF brochure.

Finally, content shouldn’t just highlight the benefits of share plans – it must also make risks clear. All too often, risks like inflation or the possibility of losing money are buried in legal language or footnotes. It’s important to explain these risks in a way that’s as approachable as the rest of your content.

By following the 'fair, clear and not misleading' principle, you'll make sure employees understand and trust what you're saying. This is how to generate genuine engagement with your plan.

What about financial education?

Recently we’ve seen more employers providing financial education for employees. This accelerated during the cost-of-living crisis as companies realised workers needed extra support with their finances.

And the recent reduction in the capital gains tax (CGT) allowance has created a more pressing need to educate share plan members, with more maturing SAYE plans delivering profits which exceed the allowance.

But a common and valid concern among issuers is how to stay within the FCA’s guidelines when talking about wider investment topics.

For instance, when discussing options like ISAs or spousal transfers as potential ways to reduce CGT, how can you make sure this remains educational and doesn’t stray into giving financial advice?

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The FCA’s focus on outcomes

The important thing to remember here is that the FCA is focused on outcomes, rather than prescribing specific processes.

We think this gives issuers the green light to help employees make smart choices. But it’s a good idea to get some expert help with this, as you need to be sure you’re giving accurate information in a compliant way. As we discussed earlier, providing advice would count as a breach.

The FCA’s view on best practice: a proactive approach 

The FCA highlights some key examples of good practice when it comes to communication, which are especially relevant for issuers of employee share plans:

· Working with communication experts to simplify complex financial topics.

· Using plain language and improve the accessibility of your communications.

· Being proactive in delivering timely, helpful information to employees.

These practices not only ensure compliance, but also support better financial outcomes for employees, which is a win for both the company and its workforce.

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Share plans: the gateway to financial wellbeing

Share plans are often an employee’s first step into the world of investing. They can act like stabilisers on a bike, removing some or all of the risk.

But once those stabilisers come off, employees can be left exposed to market volatility, with a significant portion of their wealth in one company’s shares.

We think issuers should educate employees about topics like investment risk and diversification during the course of a share plan – in effect teaching them to ride the bike while the stabilisers are still in place.

Share plans can be an excellent first step toward making employees confident and competent investors – providing them with the tools they need to build financial stability and success over their lifetimes.

RewardPro is here to help you achieve that, with compliant, clear, and compelling share plan communications. If you’d like a personal run-through of the topics covered here, or just want to chat about any other aspect of your share plan communications, we’d love to hear from you.

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