Currently, over half of the UK population subscribe to at least one or more social media platforms such as Facebook and Twitter. As a relatively new and incredibly fast moving form of electronic communication, it has been suggested that the UK Financial Conduct Authority (“FCA”) formal response and initial and follow-up guidance as to the interplay between making financial offers to the UK public has been piecemeal at best but also some have been vocal about the delay in the FCA producing formal, practical and up-to-date guidelines as to the rules and protections applicable to the offering of fundraising opportunities to the UK public.
In recognition of the rapid increase in the use of social media in the financial and fundraising context, on 6 August 2014 the FCA consulted on new guidance entitled “Social media and customer communications: The FCA’s supervisory approach to financial promotions in social media” for the financial sector, which is expected to be published in final form, early this year. The guidance has been well received as it provides practical examples of “do’s” and “don’ts” when using social media for financial promotion purposes.
“Fair, Clear and Not Misleading”
Entities making financial promotions, whether corporates or individuals, are required to include certain information alongside promotions of their financial products and services, such as disclosure of the relevant risks facing customers. The relevant advertisements or promotions cannot simply highlight the benefits or the “up-side” of making a particular investment.
The FCA highlights that financial promotions, regardless of the method by which they are made, must be identifiable as such and has again emphasised the overarching principle that all communications, including those made through the relatively new medium of social media must nevertheless still be “fair, clear and not misleading”.
As users of certain social media platforms will no doubt be aware, a number of such platforms impose character, space or time limitations on the postings or “tweets” which they host. For example Twitter imposes a maximum of 140 characters per “tweet”, with Instagram limiting video postings to a maximum duration of 15 seconds and the video sharing platform Vine having similar restrictions. Adverts placed on Facebook have a mandatory 25 character limit for the headline, with a 90 character limit for the body of the promotional text.
One of the main areas of confusion amongst those parties wishing to utilise this increasingly effective fundraising tool has been how to reconcile the word/character restrictions and time limits which, until the publication of, and practical examples contained in “Social media and customer communications” guidance consultation seemed incompatible and unworkable with FCA requirement to include prescriptive risk warnings and/or other specific statements in financial promotions.
Twitter – the use of “infographics”
One possible solution suggested by the FCA is to insert images into tweets, by way of ‘infographics’ (graphic visual representations of
data or knowledge), which allow the presentation of complex information quickly and clearly. However, firms must be mindful of the functionalities of the platform that may or may not support this use of infographics. For instance, a Twitter image can be “switched off” so that it appears as a link. Therefore, where a financial promotion triggers a risk warning or requires other information to be included, it cannot appear solely in the image.
Another option is for firms to tweet or post a link to a website containing the financial promotion. This could include signposting language to encourage consumers to open the link, provided the signpost is itself is compliant with the FCA rules. For example, “to see our current mortgage offers, go to www.oceanmortgages.co.uk”. Firms must be careful not to include language which contains an element of inducement. For example, “To see our great mortgage offers, go to www.oceanmortgage.co.uk”. This statement is non-compliant and would therefore trigger the requirement for a risk warning.
While the draft guidance provides an insight into the FCA’s approach to the use of social medial in financial promotions, it only provides suggested solutions to specific situations. Since April 2014 alone, the FCA has opened over 230 cases in respect of non-compliant promotions of products in the consumer credit sector, approximately 80% of these relate to digital media, so firms still need to carefully evaluate their social media activities against the FCA rules. Involving legal advisors in the design and implementation of social media strategies can help firms reach out to consumers with financial promotions via social media, whilst remaining comfortable that they are compliant with the FCA rules.