You may not qualify as a HNWI for angel investment any more

This is not a good thing for start up companies seeking early stage money, as the pool of willing and able investors is currently quite "tight"

The government has introduced new rules that affect how companies can advertise and promote financial investments to wealthy individuals and knowledgeable investors. These changes are part of a larger effort to protect investors and tighten the regulations around advertising financial products.

First, let's clarify what financial promotions are. They are messages or advertisements from companies that encourage people to invest their money. Companies that aren't authorized to provide financial services are usually not allowed to make these promotions, unless they get approval from an authorized company or meet specific exemptions.

Now, what's changing and why? The current rules allowing promotions to high net worth individuals (HNWIs) and self-certified sophisticated investors have not been updated since 2005. These rules were created to help small and medium-sized businesses raise money from wealthy individuals without having to deal with all the financial advertising regulations.

However, these rules are being updated to better suit today's circumstances and to prevent misuse. There will be changes to the criteria that determine who qualifies as an HNWI or a self-certified sophisticated investor. Companies will also have to provide more information in their promotions, like their contact details and registration information. Additionally, there will be changes to the documents investors receive when they're considered HNWIs or self-certified sophisticated investors to make it clearer what protections they might lose by receiving these promotions.

Critically, the lower limit for self-certification is rising to £170,000

Current

• Having an annual gross income of £100k or greater.

• Having net assets of £250k or greater. (definition of “net assets” is complex, so do get advice)

• Made more than one investment in an unlisted company in the previous two years.

• having been a director of a company with an annual turnover of at least £1m.

New

• Income threshold will be increased to £170k.

• This threshold will be increased to £430k.

• Unlisted investment criterion of having to have made more than one investment in an unlisted company in the previous two years.

• Director criterion rises to require an annual turnover requirement of £1.6 million.

These changes are expected to take effect on January 31, 2024. Companies that rely on these exemptions should start preparing now to make sure their promotions comply with the new rules. They should review their processes, update their records, check if their investors still meet the new criteria, and train their staff to follow the rules.

For the Angel investor market, this may have the effect of reducing the “pool” of qualifying investors in the working population by about 2% or so (650,000 people will likely no longer qualify).

If companies have already made promotions under the old rules before January 31, 2024, they can still follow up on those promotions without needing to update the investor statements, as long as they meet other requirements.

These changes are meant to ensure that financial promotions are done responsibly and that investors are protected from inappropriate or misleading advertisements.