FCA warns firms on use of social media to promote financial products
The UK financial services regulator, the Financial Conduct Authority (FCA), has launched a guidance consultation in order to clarify and confirm its approach to the supervision of financial promotions in social media, including the use of character-limited forms (Examples of character-limited formats are Twitter (which limits tweets to 120 characters) and Vine (which limits videos to six-second loops).
The FCA has identified an increase in the use of character-limited social media (and social media generally) and warned of confusion among firms over the inclusion of regulatory information such as risk warnings (in compliance with the financial promotion rules) when communicating through social sites such as Twitter, Pinterest and Vine. And, as the FCA makes clear, every communication (e.g. each tweet, Facebook page or insertion) must be considered individually and comply with the relevant rules.
The requirement for financial products to be fair and not misleading means consumers should have an appreciation of the relevant risks (through risk warnings) as well as the benefits of a particular product. The FCA's recommendations include not promoting more complex financial products through social media channels, and using embedded infographics to include relevant information. The FCA also confirms that use of the hashtag #ad is an acceptable way of complying with the rule that financial promotions for investment products are identifiable as such.
The FCA does not wish to block social media use but requires firms to adhere to existing guidelines. According to Clive Adamson, FCA director of supervision, the "FCA sees positive benefits from using social media but there has to be an element of compliance" and "financial promotions, whether on social media or traditional media, should be fair, clear and not misleading."
The FCA's consultation, which will close on 6 November this year, seeks feedback from firms on its proposed guidance. Feedback may be sent by email, or by post to Richard Lawes, Financial Promotions Team, The Financial Conduct Authority, 25 The North Colonnade, London E14 5HS. The FCA is also planning to commission research to better understand how consumers receive, use, and contextualise financial promotions via social media communications.
The FCA is not new to social media by any means. It published an update on financial promotions using new media in June 2010; it has deployed teams to monitor and engage with Twitter users; and it uses Salesforce.com's Radian6 application to mine data on social media platforms and to spot general trends.
Some of parts of the proposed guidance are also be relevant to broadcast and print media.