When a deal pack becomes a financial promotion

The most common regulatory mistake in property sourcing is not made by people who know they are near a line. It is made by people who do not believe the line applies to them, because what they are selling is a house.

What makes a communication a financial promotion?

Two things together: it is an invitation or inducement to engage in investment activity, and it is made in the course of business. Both halves matter. Material that merely informs is not an inducement; material designed to persuade somebody to put money in is, whatever it is called and whether or not it asks for money directly.

The consequence is not a fine and a form. Communicating one without authorisation or an exemption is a criminal offence, and an agreement entered into as a result may be unenforceable against the investor — which means they can ask for their money back, and get it.

It is worth separating this from two things it is often confused with. It is not the same question as customer due diligence, which asks who you are transacting with and is an anti-money-laundering obligation. And it is not the same as material information, which is what must be published about the property itself before it can be marketed. A pack can satisfy both and still be an unlawful promotion.

Land is not a controlled investment — until it is packaged

Buying a house is not investment activity in the regulatory sense. Land itself is not on the list of controlled investments, which is precisely why a deal pack for your own purchase is not a financial promotion and why the property world contains so much material that would be unlawful in any other asset class.

What changes it is the wrapper. Shares in a special purpose vehicle are a controlled investment. A loan note is a controlled investment. A profit share in somebody else's project is very likely one. The moment the pack invites participation in a structure rather than a purchase, the same document has changed category without changing a word.

A yield, a margin or a return on cash published to persuade is the other trigger, and it is the one that catches ordinary marketing. A discount and a cost describe a property. A return describes what an investor would make from it.

The exemptions, and what categorisation actually is

There are exemptions, and the ones people reach for concern investors who are certified as high net worth or as sophisticated. They are real and they are narrower than they are usually treated.

Categorisation is a signed statement by the investor, in a prescribed form, before the promotion is made. It is not a checkbox, not a tick on a landing page and not something that can be inferred from somebody's behaviour. A promotion sent first and categorised afterwards was an unlawful promotion at the moment it was sent.

How should a deal pack be written?

• Decide what is being offered before writing a word. A property, or a participation. The whole answer follows from that.
• Keep property arithmetic and investor returns apart. Cost, price and true discount describe the asset; margin, loan to GDV and return on cash describe a stake in it.
• Label a worked example as a worked example. An illustration is not a statement that opportunities are available at that figure.
• If a return has to be published, get it approved by an authorised person first. There is no version of this where it is easier to fix afterwards.
• Where you are not sure, withhold the figure and say why. A page that explains what it is not permitted to say is more credible than one that quietly says it.

What we do about it

The permission is recorded or it is not held, and the code reads the record rather than an assumption. Where the platform does not hold approver permission, the public pages do not publish opportunity returns and they print the reason instead of leaving a gap. Deal economics — the Deal Score, the capital stack, the exit matrix — sit behind categorisation, which is a form somebody signs.

This page is a description of how the rules work, not legal advice, and the perimeter has genuinely difficult edges. If a structure is being built, the time to ask a regulatory solicitor is before the first pack goes out — not after somebody asks for their money back.