Who: the Financial Conduct Authority (“FCA”)
Where: United Kingdom
When: 13 March 2015
Law stated as at: 17 April 2015
What happened: the FCA has published its guidance on financial promotions in social media, which encompasses digital media forms such as blogs, microblogs (e.g. Twitter), social networking sites (e.g. Facebook), forums and image and video-sharing platforms (e.g. Instagram).
The guidance reminds firms that any form of communication, including through social media, is capable of being a financial promotion if it includes an invitation or inducement to engage in financial activity. If a communication is deemed a financial promotion it becomes subject to the UK’s financial promotions regulation regime.
The guidance clarifies the FCA’s approach to the supervision of financial promotions. As an example, a financial promotion would only be caught within the regulatory regime if it is made in the course of business and the guidance provides examples of when a firm will be deemed to be acting in the course of business when using social media.
The guidance also sets out considerations that financial service providers need to take into account when communicating with their customers via social media. It states, amongst other things, that:
- each communication (e.g. each tweet) must be considered individually and must comply with financial promotion regulations, including the rule that it must be fair, clear and not misleading; and
- each firm must have an adequate system in place for the sign-off of social media communications by an appropriately senior and competent person within the firm.
Firms are also generally reminded that with respect to the non-technical aspects of financial promotions (for instance, matters of serious or widespread offence and social responsibility), they must comply with the advertising codes of the Committee of Advertising Practice administered by the Advertising Standards Authority.
Why this matters:
Businesses are increasingly using social media to reach out to their customers and financial services firms are no different. Social media allows financial services firms to reach a wider audience and, in many cases, a demographic that they may not otherwise have reached (for instance, younger age-groups).
The FCA’s guidance gives financial service providers some clarity as to how they will be regulated in the social media sphere. The guidance becomes particularly useful and relevant when using social media, such as Twitter, which have character limitations that make issuing regulatory compliant financial promotions a challenge. The guidance gives useful examples and illustrations of what would constitute a compliant promotional tweet and what would constitute a non-compliant promotional tweet.
Social media is often seen as an informal way of engaging with others. However, the FCA’s guidance makes it clear that financial promotions via social media must be approached with the same level of diligence as financial promotions via more traditional media forms.
The FCA’s guidance was published after extensive consultation with various stakeholders in the financial services industry. The FCA therefore believes that the resulting guidance reflects a sensible approach that allows the industry to innovate using new forms of media and at the same time ensure customers get the right level of protection.
The Guidance is here.