November 15, 2022

New Risk Warning Rules for UK Private Fund Managers: Action Required

In our previous client alert, we mentioned the need for managers to review new rules contained in PS22/10, published by the UK Financial Conduct Authority (FCA).

The rules governing the main risk warnings for financial promotions of high-risk investments will take effect starting 1 December 2022.

FCA-authorised managers and distributors/placement agents who wish to promote funds, including non-UK funds to investors who would otherwise be classified as retail investors, will need to ensure that materials, such as private placement memoranda and other promotional communications, include the prescribed risk warning and risk summary. These are discussed below. 

The other provisions and the bulk of the new rules, together with a statement of the existing rules in the COBS 4.12 chapter of the FCA Handbook (which will be repealed in their entirety with new rules), the most relevant of which will be those in the new COBS 4.12B, will take effect starting 1 February 2023

These will include rules, some of which are the same as those that currently apply, on:

  • The preliminary assessment of suitability
  • Personalised risk warnings and “cooling off periods”
  • Restrictions on monetary and non-monetary benefits
  • Providing risk warnings

We intend to cover the remaining rules in an alert closer to the time that they come into force.


The PS22/10 rules identify Non-Mass Market Investment (NMMI) as a category of high-risk investment. Non-Mainstream Pooled Investments (NMPI), the promotion of which are currently governed by the rules in the COBS 4.12 chapter of the FCA Handbook, are included as a type of NMMI. 

PS22/10 expressly confirms that a unit in an unregulated collective investment scheme and a unit in a qualified investor scheme, as well interests in long terms asset funds, are NMPIs; the rules should, therefore, apply to all private funds unless they are marketed as UCITS funds.


The starting point in the current rules restate (and from 1 February, the new COBS 4.12B will replace but restate the current COBS 4.12 wording) the restriction on promoting an NMPI: a firm, such as a manager or distributor/placement agent, must not communicate or approve a financial promotion that relates to an NMPI where that financial promotion is addressed to, or disseminated in such a way that it is likely to be received by, a retail client. 

The rules qualify this restriction stating, in effect, that if an investor falls within a category identified in the rules, the firm may promote the NMPI to that investor. The restriction does not apply to units in unregulated collective investment schemes, which are subject to a statutory restriction on promotion in section 238 of the Financial Services and Markets Act 2000. Together, with eight other categories of investor, the list includes (and from 1 February will continue to include):

  • Certified high-net-worth-investors
  • Certified sophisticated investors
  • Self-certified sophisticated investors

It is in promotions made to these types of investors that the risk warning and risk summary will need to appear.


The rules require a risk warning in the following terms (the first sentence only where the warning would otherwise exceed the number of characters permitted by a third-party marketing provider):

"Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong."

The rules require the risk warning, when communicated in a digital medium, to have a link in the form of text stating “Take 2 mins to learn more” which, when activated, delivers the risk summary in the Annex to the rules. Where the promotion is not made digitally, the risk summary must be provided in a durable medium (e.g., as part of a private placement memorandum or promotional document that accompanies the memorandum).  

The risk summary must be in the form prescribed in the Annex to the rules, unless the firm has grounds identified in the rules for departing from that form and also comply with rules as to its presentation (e.g., the requirement that the summary be prominently brought to the retail client’s attention, taking into account the content, size and orientation of the financial promotion as a whole). The prescribed form covers the following:

  • The key risks, described under the headings:
  • You could lose all the money you invest
  • You are unlikely to be protected if something goes wrong
  • You are unlikely to get your money back quickly
  • This is a complex investment
  • Don’t put all your eggs in one basket
  • A statement directing investors to the FCA’s website

The rules also require that the warnings are: (a) prominent, taking into account the content, size and orientation of the financial promotion as a whole; (b) except where the risk warning cannot be provided in writing, clearly legible, contained within its own border and with bold and underlined text. For website communications, the warnings must: (a) be statically fixed and visible at the top of the screen, below anything else that also stays static, even when the user scrolls up or down the webpage; and (b) be included as described in (i) on each linked webpage on the website or page on the application relating to the NMPI (i.e., fund, in question). 

The rules prohibit any promotion from containing any design feature that has the intent or effect of reducing the visibility or prominence of a risk warning or risk summary. They also prohibit any promotion from containing any design feature which has the intent or effect of reducing the visibility or prominence of the risk summary.

To discuss the contents of this alert, please contact the authors or your usual Goodwin contact.