The Financial Conduct Authority (FCA) has issued guidance on financial promotions in social media.
The UK regulator took the decision to clarify its approach to supervision in light of increased use of digital media, and social media in particular, as a vehicle for customer communications and financial promotions.
The way companies use social media is coming under increasing scrutiny by regulators across the globe. In the US, for instance, the SEC ruled recently that public companies can use such platforms to announce key information in compliance with Regulation Fair Disclosure as long as investors have been informed which social medium the company will use to report the information.
Over the past year, the FCA found that many UK companies consider it difficult to comply with some of the existing rules, particularly those involving platforms with limits on the number of characters used, such as Twitter.
According to the regulator, rules on financial promotion are designed to ensure that consumers receive certain information in a fair, clear, and balanced way from the start of their interaction with a particular firm. The consumer must also be aware of the risks, as well as the potential benefits, of any financial products or services promoted. These rules are intended to be media-neutral.
Social media-specific considerations:
- Each individual tweet or post must be compliant with the relevant rules, and risk warnings must be included in promotions for certain products/services.
- Given the constraints of character-limited media, the FCA recommends that firms consider the appropriateness of the vehicle for promoting products with complex features, advising if they do so to include a link to more detailed information.
- Promotions for investment products must be identifiable as a promotion. This can be achieved by including the hashtag #ad in online posts.
- To manage the risk of communications reaching unintended recipients (through retweets, or sharing on Facebook), use software that enables advertisers to target particular groups very precisely.
“Our overall approach is that financial promotions, whether on social media or traditional media, should be fair, clear, and not misleading,” Clive Adamson, director of supervision at the FCA, said in a news release. “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 authority has launched a consultation, inviting feedback from the industry. The consultation closes on November 6th, 2014. The guidance paper can be found here.
—Samantha White (swhite@aicpa.org) is a CGMA Magazine senior editor.
