Guidance on Financial Promotions in Social Media

March 17, 2015

The Financial Conduct Authority (FCA) has published its guidance on financial promotions in social media. This follows detailed engagement and consultation with the industry.

The FCA recognises that social media are powerful channels of communication which are of significant value to firms and do not want to prevent their use. The guidance is designed to assist firms in their use of social media and ensure that they are compliant with the FCA’s financial promotion requirements.

Tracey McDermott, FCA Director of Supervision and Authorisations, commented:

‘Social media is already an important tool for industry to engage with customers and its use is only likely to grow. Financial promotions, whether on social media or traditional media, must give customers the right information and meet our requirements to be fair, clear and not misleading. We have had extensive industry feedback during our consultation. We believe this guidance reflects a sensible approach that allows the industry to innovate using new forms of media and at the same time ensures customers get the right level of protection.’

The Guidance

Firms are reminded 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 financial activity. All communications (including financial promotions) must be fair, clear and not misleading. Promotions that fail to be ‘fair, clear and not misleading’ can pose a risk as they could lead consumers to buy the wrong product – ultimately with unhappy outcomes for them and for firms.

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 when deciding the nature of their promotions. Firms should 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 retweeting on Twitter or sharing on Facebook). One way of managing this risk is the use of software that enables advertisers to target particular groups very precisely.

The requirement to be fair and not misleading requires 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 whether it is appropriate to use 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’ to promote a firm more generally.

The Finalised Guidance sets out in further detail specific areas that firms need to consider, and provides some solutions and illustrative examples. These include:

  • Stand-alone compliance – Each communication (eg a tweet, a Facebook insertion or page, or web page) needs to be considered individually and comply with the relevant rules.
  • Risk warnings and other required statements – Firms are reminded that there are requirements to include risk warnings or other statements in promotions for certain products/services. These rules are media-neutral and therefore apply to social media as they would to any other medium. This poses particular challenges for the use of character-limited social media. One possible solution to the problem of character limitation is to insert images, including the use of infographics, into communications such as tweets, which allows relatively unrestricted information to be conveyed. The image must also be compliant.
  • Image advertising – Firms are reminded that it remains possible to advertise their presence in the market through ‘image advertising’ in a way that is less likely to present difficulties with character limits.
  • Recipients sharing or forwarding communications – Where a recipient shares or forwards (such as by retweeting) a firm’s communication, responsibility lies with the communicator, so in that case the firm would not be responsible. Firms are reminded, however, that any breaches of our rules in the original communication are still the responsibility of the originating firm, and not the ‘retweeter’. Sharing or forwarding by a third party does not ‘cure’ any original non-compliance.
  • Unsolicited promotions – The FCA reminds firms that are considering sending marketing through electronic media that there are specific legal requirements that they must comply with when doing so. Social media are prime channels for making unsolicited promotions. For such promotions and ‘cold calling’ (unsolicited real-time promotions), the FCA reminds firms of the rules that apply.
  • Approval and record-keeping – Firms must have an adequate system in place to sign off digital media communications. This sign-off should be by a person of appropriate competence and seniority within the organisation.

Advertisers are also required to adhere to the Committee of Advertising Practice Code, which applies to ‘non-technical’ elements of financial advertising, for example matters of social responsibility, harm and offence.

For the Finalised Guidance, see FG15/4 – Social media and customer communications: The FCA’s supervisory approach to financial promotions in social media which contains examples of acceptable and unacceptable financial promotions.