British regulators believe it should be possible to promote financial products and services via social media, according to new proposed guidance issued on Wednesday, so long as the usual obligations to identify promotions and flag risks apply.
The UK’s Financial Conduct Authority (FCA) launched a consultation today that aims to clarify the regulator’s approach to the supervision of financial promotions in social media. It notes that firms are often unsure about how to comply with the rules in this area, particularly when it comes to the use of services, such as Twitter, which limit the number of characters that can be used. The consultation sets out its proposed approach, and seeks feedback from the industry.
“The FCA sees positive benefits from using social media but there has to be an element of compliance. Primarily, what firms do on social media must ensure customers are at the heart of their business,” said Clive Adamson, director of supervision at the FCA.
“Our overall approach is that financial promotions, whether on social media or traditional media, should be fair, clear and not misleading. 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,” said Adamson. “We recognise social media are constantly evolving. We, therefore, welcome feedback to today’s consultation and look forward to continuing the discussion with industry.”
Overall, the FCA says that its approach is that its rules about financial promotions should apply, regardless of the media channel being used; and that the overarching principle is that any communication should be fair, clear and not misleading. In terms of social media, there’s still a fundamental requirement that all communications (including financial promotions) must comply with these principles, it notes.
“Firms should therefore ensure that their original communication would remain fair, clear and not misleading, even if it ends up in front of a non-intended recipient (through others re-tweeting on Twitter or sharing on Facebook),” notes the consultation paper. “A way of managing this risk is the use of software that enables advertisers to target particular groups very precisely.”
The consultation paper also points out that promotions for financial products must be clearly marked as promotional. The FCA says that for social media in particular “it is important that, in all cases, it is clear that a promotion is a promotion.” And, it suggests that one generally accepted way to do this in character-limited media, such as Twitter, is to use the hashtag, #ad, in online posts.
Including the necessary risk warnings is also a challenge on platforms such as Twitter, it notes. “One solution to the problem of character limitation is to insert images, such as infographics into tweets, which allows relatively unrestricted information to be conveyed,” it says. “However, where the financial promotion triggers a risk warning or other information required by our rules this cannot appear solely in the image.”
For certain, more complex products and services, the FCA says that firms should consider whether character-limited media is an appropriate way of promoting. “It may be possible to signpost a product or service with a link to more comprehensive information provided that the promotion remains compliant in itself. Alternatively, it may be more appropriate to use ‘image advertising’,” it suggests.