Who: The UK’s Financial Conduct Authority (the “FCA”)
Where: United Kingdom
When: 6 August 2014
Law stated as at: 6 August 2014
What happened:
The FCA published its guidance consultation paper (GC14/6) Social media and customer communications (“Draft Guidance”):
Financial services firms increasingly utilise digital media, including social media networks such as Facebook and Linkedin and microblogs such as Twitter, to reach out to customers and promote their brands, products and services. The Draft Guidance seeks to clarify the FCA’s supervisory approach to financial promotions in social media. It has invited input and feedback to the consultation by 6 November 2014.
The overall objective of the Draft Guidance is to provide good and bad examples of tweets, banner adverts and Instagram images and thereby enable firms to produce communications using social media which invite or induce individuals to engage in investment activity i.e. “financial promotions” that are at all times “fair, clear and not misleading.”
Why this matters:
Firms are increasingly more sophisticated in their use and manipulation of social media in building customer relationships and promoting their brand, their products and their services. In our digital age, such forms of communication – a tweet, a Facebook advert or an Instagram image – are “particularly powerful channels of communication” and the FCA is clear that it does not want to prevent their use, noting that the use of social media crucially enables new and smaller firms to reach a wider audience.
Core to the FCA’s objectives is consumer protection. The Draft Guidance, once finalised and published, should help firms navigate the FCA’s financial promotion rules and get a better understanding of what is, and is not a compliant financial promotion.
For example, when it comes to tweets, it is key to note that whilst firms may use images and infographics to convey risk warnings, the functionality to display a Twitter image may be switched off. This will leave just a non-functioning link to the image, so the Draft Guidance states that any risk warnings or other key information as required under the FCA’s rules must not be displayed solely in the image and must be included in the tweet itself.
Workarounds provided
What is particularly useful about the Draft Guidance is that the FCA acknowledges the limitations of making communications over social media, specifically that there are limits on the number of characters that can be used, and provides workaround solutions such as:
• the use of images and infographics in tweets (subject to the dangers of switched off functionality);
• the use of a link to a website setting out the financial promotion, for example a neutral tweet with a link to the website. The FCA uses the example of “To see our current mortgage offers, go to…” noting that “To see our great mortgage offers, go to…” would not be stand-alone compliant as the latter is in itself a financial promotion and would require additional information, including a risk warning; and
• image advertising whereby the content of the advertisement is limited to: the firm’s name; its logo; a contact point; and a reference to the firm’s regulated business or its fees or commissions.
The overarching message to firms is clear:
• take responsibility and ensure that any financial promotions are at all times “fair, clear and not misleading”; and
• consider whether social media, particularly any form of communication which has a character limit, is the appropriate medium when communicating complex features of financial products or services.
The FCA also confirms that a firm will be responsible for the form and content of a financial promotion and its original communication but will not be held responsible for any subsequent re-tweet or forwarding by a recipient. This is because the FCA regards responsibility for the communication as lying with the communicator, which in this case would be the recipient who forwards or shares the firm’s original financial promotion.
The Draft Guidance can be viewed in full at this link.
