Explaining that while it sees positive benefits from the use of social media, there must be an element of compliance.
In a new guidance consultation that follows 18 months of extensive consultations with the industry, the FCA seeks to clarify its stance on the supervision of social media on the understanding that firms have increased and will continue to increase their use of the medium.
According to Clive Adamson, director of supervision: “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.”
The key point from the guidance is that promotion of financial products should be “media-neutral”, in other words consumers need to be presented with certain minimum levels of information in a balanced way that is not misleading, irrespective of the form the message.
The FCA recognises that this poses a challenge especially when messages are limited to 140 characters, but it says that firms need to understand that “each communication (e.g. a tweet, a Facebook insertion or page, or web page) needs to be considered individually and comply with the relevant rules.”
Two ways that firms can solve this issue, it suggests is through the use of hashtags like #ad, which clearly mark the communication as a promotion and, also the use of images that allow firms to circumvent the character restrictions.
The use of hashtags is particularly important as there is a specific requirement that financial promotions for investment products are identifiable as such.
According to the FCA, firms should also consider that 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 says, “it may be more appropriate to use ‘image advertising’ to promote a firm more generally.”
But, it cautions, “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.”
As a result, “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).”
The FCA is now seeking comments on the guidance note and says its next step is to commission exploratory, qualitative research to gain “a better understanding of how consumers receive, use and contextualise financial promotions that may come to them through social media communications”.
