The FCA has announced a consultation process with regards to financial services in Social Media.
Draft Guidance has also been published to cover all areas of Social Media, including Facebook, Instagram and Twitter.
This is a complex area and examples of potential compliant and non compliant advertisments are included in the consultation paper.
Clive Adamson, Director of Supervision at the FCA said:
“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.
“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. We recognise social media are constantly evolving. We, therefore, welcome feedback to today’s consultation and look forward to continuing the discussion with industry.”
The FCA recognises that social media particularly are powerful channels of communication and therefore of significant value to firms. The FCA does not want to prevent their use. These media allow firms to contact their customers, and vice versa, both pre- and post-sale. However, firms are reminded that any form of communication (including through social media) is capable of being a financial promotion, depending on whether it includes an invitation or inducement to engage in financial activity. Therefore it remains a fundamental requirement that all communications (including financial promotions) are compliant.
Communications through social media can reach a wide audience very rapidly, so firms should take account of that in their decision to promote through social media, and the nature of their promotions. 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). A way of managing this risk is the use of software that enables advertisers to target particular groups very precisely.
The requirements to be fair and not misleading imply balance in how financial products and services are promoted, so that consumers have an appreciation not only of the potential benefits but also of any relevant risks. Firms should consider the appropriateness of character-limited media as a means of promoting complex features of financial products or services. 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’.
The consultation paper sets out in further detail specific areas that firms need to consider, and provides some solutions and illustrative examples. These include:
"I welcome this attempt to provide guidance in this area, as it forms a key part to most modern financial services companies advertising and marketing campaigns. The difficulty is how to translate specific the guidance given within some of the constraints of each medium." commented Match the Catch Ltd's CEO Rob Udy. "For example there are simply not enough characters within a Tweet to include a representative example, it is really important that the implications of impacts such as this are considered as part of the consultation process."
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