FCA to Financial Services Firms: Social Media Promotions Require #Ad Compliance
Hedge fund marketing and advertising has greatly evolved in the past few years, both with regulatory changes taking effect (in the US, the JOBS Act now allows public advertising) and new forms of media emerging, particularly social platforms such as Twitter, Facebook, LinkedIn and YouTube.
In the UK this week, the Financial Conduct Authority (FCA) took steps to further regulate how financial services firms market to consumers by launching guidance consultation on social media usage. As evidenced by FCA Director of Supervision Clive Adamson, the consultation is intended to ensure financial promotions on social media platforms protect consumers and are disseminated in a way that fairly balances both benefits and risks:
“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 [the] consultation and look forward to continuing the discussion with industry.”
The FCA is currently soliciting opinions and advice from financial services in regards to social media promotions. At this time, however, they are encouraging firms to practice the following:
Identifying promotions: Firms should clearly identify product/service promotions as such; one accepted method, especially for character-limited media, is the use of #ad within the post
Stand-alone compliance: Each communication (i.e. a tweet, Facebook post, etc.) needs to be considered individually and comply with all relevant rules.
Risk warnings: Certain product/service promotion may require the use of risk warnings or other required statements under law.
Image vs. text: Consider using image advertising in place of limited character opportunities, but remember risk warnings and other pertinent information cannot appear solely in the image.
This week’s guidance could develop into official policy changes to the FCA’s initial guidance on the use of social media, first published back in 2010. At the time, the FCA (it was then known as the Financial Services Authority) released guidance regarding the use of “new media” channels for promotions. The regulator had conducted a review of social media pages operated by a variety of financial companies and determined many firms were not taking proper compliance rules into consideration and should evaluate whether social platforms were appropriate for promotions.
The big question seems to be whether a firm can adequately disseminate the risks and conditions associated with a promotion or sale of services via a social media outlet, particularly one with character/time restrictions. Twitter’s unique platform, for example, only allows 140 characters. Vine, the video sharing service, limits uploads to six-second clips. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: "to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers."
For more information on the FCA’s social media guidance consultation for financial services firms, click here.
More Resources on Financial Firms and Social Media Usage:
Smart Phone Photo Credit: Jason Howie via Flickr