The Financial Conduct Authority (FCA) has recently published a guidance consultation entitled "Social media and customer communications", which sets out the FCA's supervisory approach to financial promotions in social media, including its character-limited forms.
The views expressed by the regulator should not come as a surprise to firms, as they are based on the FCA existing rules and, more broadly, the requirement under Principle 7 of the FCA's Principles for Businesses that firms must communicate with customers in a way that is clear, fair and not misleading.
Some useful views expressed by the regulator with a practical application are as follows:
- COBS 4.3.1R requires that financial promotions for investment products are identifiable as such. For social media in particular, the FCA's view is that in all cases it is important that a promotion is clearly identified as a promotion. One generally accepted way to do this for character-limited media is the use of "#ad";
- Considering how quickly communications through social media can reach a wide audience, firms should ensure that their original communication would remain fair, clear and not misleading, even if it ends up in front of a non-intended recipient (through others re-tweeting on Twitter or sharing on Facebook);
- Principle 7 implies the need for balance in how financial products and services are promoted, so that consumers have an appreciation not only of the potential benefits but also of any relevant risks. For more complex products or services advertised in character-limited media, it may be possible to signpost a product or service with a link to more comprehensive information, provided that the promotion remains compliant in itself (in accordance with specific requirements for financial promotions in the Handbook, such as COBS 4, MCOB 3, ICOBS 2, BCOBS 2 and CONC 3);
- When deciding whether a particular statement meets the rules on prominence, consideration should be given to the target audience, the nature of the product or business and the likely information needs of the average recipient. Targeted consumer testing is an avenue that could be explored to assist with firms' assessments in this area;
- The FCA Handbook contains requirements to include risk warnings or other statements in financial promotions for certain products/services. These rules are media-neutral and therefore apply to social media as they would do to any other medium;
- In the context of character-limited media, one possible solution is the use of infographics into communications such as tweets, which allows relatively unrestricted information to be conveyed. Infographics are graphic visual representations of information, data or knowledge intended to present complex information quickly and clearly. However firms must be aware of the functionality that allows, for instance, a Twitter image to be switched off so that the image appears simply as a link (for instance where the recipient with a mobile device chooses to do so to save battery or speed up processing time). This might have the unintended consequence of making the promotion non-compliant, for instance where the promotion triggers a risk warning and the warning is only contained in the image;
- Firms can also tweet a link to a website with a financial promotion, and may want to include some signposting language to encourage the recipient to open the link. Firms must remember that the signpost must be standalone compliant as a promotion;
- Firms are reminded that it remains possible to advertise their presence in the market by way of "image advertising", which resembles "brand" advertising although there are specific requirements under the FCA Handbook for these types of ads;
- The FCA considers a tweet a "non-real time promotion" in line with the Financial Promotion Order. Non-real time promotions are those which create a record of the communication, are directed at multiple recipients, and do not require the recipient to respond immediately;
- Firms are reminded that, when making unsolicited promotions, they need to comply with the specific legal requirements arising from Regulations 21 and 22 of the Privacy and Electronic Communications Regulations 2003;
- Firms are also reminded of their obligations to have an adequate system in place to sign-off digital media communications (the sign-off should be by a person of appropriate competence and seniority within the organisation) and keep adequate records of any significant communications (which should not only help to protect consumers, but also allow the firm to deal effectively with any subsequent claims or complaints).
If firms wish to respond to the FCA's guidance consultation with their views, they should do so by 6 November 2014.