Following extensive conversations over the last 18 months, the Financial Conduct Authority (FCA) has launched a consultation to clarify its position in relation to financial promotions on social media. The consultation seeks to inform the approach that firms should take when using social media for financial promotions.
The FCA has noted the increased use of social media, its benefits and the pitfalls of which firms should be aware. Firms are using social media to communicate with customers and for financial promotions. However, this often creates challenges for them when adhering to FCA rules. Firms must remember that any form of communication is capable of being a financial promotion if it involves an invitation or inducement to engage in financial activity.
Whether financial promotions are made via social or more traditional forms of media, the FCA takes the approach that all financial promotion rules must be media-neutral to ensure that consumers are presented with certain minimum information in a fair and balanced way at the outset of a firm's interaction with them.
The FCA has confirmed that social media conversations involving groups and individuals not acting in the course of business are not regulated by the FCA. However, the position becomes more complicated where someone uses their personal social media account to communicate messages which are or are likely to be understood as being made in the course of their business.
The use of “#ad” to make it clear that a promotion is a promotion is acceptable for character–limited media. However, firms are asked to consider how appropriate character-limited forms of some social media, such as Twitter, are to promote complex features of financial products or services. The FCA has suggested, for example, that products or services could be signposted with links to more comprehensive information, provided that that promotion is also compliant (thereby adhering to the stand-alone principle requiring each communication to be compliant). The FCA considers that firms may also wish to consider using "image advertising" (as defined in the FCA Handbook) where character limits would otherwise prove problematic.
Clive Adamson, Director of Supervision at the FCA said: "The FCA sees positive benefits from using social media but there has to be an element of compliance. Primarily, what firms do on social media must ensure customers are at the heart of their business.
"Our overall approach is that financial promotions, whether on social media or traditional media, should be fair, clear and not misleading. We have had extensive industry engagement on this issue and we believe our guidance is a sensible approach that doesn't affect industry's ability to innovate using new forms of media."
The FCA has explained that it does not want to prevent the use of social media. However, due to the wide reach of social media, firms must ensure that an original communication remains fair, clear and not misleading, even if it ends up being viewed by someone who was not the intended recipient.
The consultation can be viewed here. It closes on 6 November 2014.