The FCA publishes new guidance consultation on financial promotions on social media
The FCA has published new social media guidance proposals that it hopes will modernise how firms promote financial products or services online including consulting on extending guidance to reflect the current ways social media is being used to advertise financial services and products.
We have seen an increase in the FCA’s supervision work of online, often illegal, financial promotions, including the recent work aimed at ‘finfluencers’ and the potential for consumer harm taking place online.
The proposed guidance supports two of the FCA’s core commitments set out in their 2023/24 business plan; to reduce and prevent serious harm and set and test higher standards.
What are the FCA proposing?
The FCA is proposing to retain the key principles of their current social media and customer communications guidance (FG15/4) which was published in March 2015. This includes the FCA’s expectation that financial promotions are ‘standalone compliant’ and expectations on the prominence of required information. However with the emergence of new social platforms and the extended use of these platforms, the Regulator has proposed further clarification on how they expect these principles to be applied to different social media marketing channels, as well as looking to address specific design features on social media that act to obscure required information.
The Consumer Duty which comes into effect from the 31st of July 2023, raises expectations of how firms communicate financial promotions on social media above the requirement of Principle 7 to be ‘clear, fair and not misleading’. Principle 12 (the Consumer Duty principle) requires firms to act to deliver good outcomes for retail customers and the FCA have stated that they will use this guidance to enhance their expectations for how firms use social media to communicate with consumers. Firms advertising using social media must consider how their marketing strategies align with acting to deliver good outcomes for retail customers. All the cross-cutting rules under the Consumer Duty are relevant to social media promotions and firms must consider how their promotions support consumer understanding and prevent foreseeable harm.
Likewise, where there is instances of third party sharing such as retweeting, any breaches of financial promotions rules in the original communication are still the responsibility of the originating firm, and not the sharer. Sharing or forwarding by a third party does not eliminate any original non-compliance.
The proposal gives guidance on emerging marketing trends such as affiliate marketing and stresses the importance of firms monitoring the communications of those using affiliate links to ensure good outcomes for consumers. The proposal also seeks to address the harm that can occur where UK consumers interact with financial promotions which direct them to a non-UK entity while the UK consumer still believes they are engaging with an FCA regulated firm.
The FCA are also proposing to further build upon the work they have done to tackle harm developing from influencers communicating approved financial promotions. The guidance looks to tackle harm occurring from unauthorised influencers communicating illegal financial promotions. There have been cases of influencers communicating financial promotions without realising they fall within the financial promotion perimeter because firms and influencers often assume there must be direct monetary compensation for an influencer’s post to be subject to the financial promotion regime.
Conclusion
It’s important that firms remember that any form of communication, including through social media, is capable of being a financial promotion if it includes an invitation or inducement to engage in investment activity or to engage in claims management activity that is communicated in the course of business.
All authorised persons and firms must comply with rules when communicating or approving financial promotions and ensure that communications are clear, fair and not misleading.
Financial Promotions that fail to comply with FCA rules can cause consumers harms and lead to poor consumer outcomes.
The full guidance can be found here, including examples of compliance and non-compliance financial promotions. The FCA have invited comments from respondents on the proposed guidance by 11 September 2023. Responses can be submitted via the form on the FCA’s website or by email to gc23-2@fca.org.uk.
