UK regulator publishes guidance on financial promotions in social media
The Financial Conduct Authority, a UK consumer-protection agency that regulates financial firms, published guidance on how organisations that lend to consumers or provide consumer credit information may use social media, such as Twitter or Facebook, to promote their services.
The FCA guidance is meant to ensure any social media promotion that invites consumers to engage in financial activity is fair, clear, and not misleading.
“Social media is already an important tool for industry to engage with customers, and its use is only likely to grow,” Tracey McDermott, FCA director of supervision and authorisations, said in a statement. “We believe this guidance reflects a sensible approach that allows the industry to innovate using new forms of media and at the same time ensures customers get the right level of protection.”
The guidelines, which the FCA confirmed after allowing the financial industry three months of feedback, require firms to provide consumers with information about potential benefits and risks. To meet the requirement, the FCA advised firms to adjust social media promotions of financial products or services with complex features by, for example, including a link to more comprehensive information.
Alternatively, the guidance says, it may be more appropriate to use image advertising to promote a firm more generally.
The finalised guidance sets out in further detail specific areas that firms need to consider and provides some solutions and illustrative examples. These include:
- Stand-alone compliance: Each communication (e.g., a tweet, a Facebook status or page, or a webpage) needs to be considered individually and comply with the relevant rules.
- Risk warnings and other required statements: Firms are reminded that there are requirements to include risk warnings or other statements in promotions for certain products/services. These rules apply to social media as they would to any other medium. This poses particular challenges for the use of character-limited social media. One possible solution to the problem of character limitation is to insert images, including the use of infographics, into communications such as tweets, which allow relatively unrestricted information to be conveyed. The image must also be compliant.
- Image advertising: Firms are reminded that it remains possible to advertise their presence in the market through “image advertising” in a way that is less likely to present difficulties with character limits.
- Recipients’ sharing or forwarding communications: Where a recipient shares or forwards (such as by retweeting) a firm’s communication, responsibility lies with the communicator, so in that case the firm would not be responsible. However, any breaches of FCA rules in the original communication are still the responsibility of the originating firm, and not the “retweeter.” Sharing or forwarding by a third party does not “cure” any original non-compliance.
- Unsolicited promotions: Marketing through electronic media or “cold calling” (unsolicited real-time promotions) must meet specific legal requirements.
- Approval and record-keeping: Firms must have an adequate system in place to sign off on digital media communications. This sign-off should be by a person of appropriate competence and seniority within the organisation.
The published FCA guidance on promoting financial products or services to U.K. consumers can be found here.
Related CGMA Magazine content:
“UK FCA Issues Guidance on Financial Promotions in Social Media”: The way companies use social media is under increasing scrutiny by regulators across the globe. A UK regulator has issued guidance for financial services companies on the use of social platforms as a vehicle for customer communications.
—Sabine Vollmer (firstname.lastname@example.org) is a CGMA Magazine senior editor.