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A Summary of FG 15/4 “The FCA’s Supervisory Approach to Financial Promotions in Social Media”
“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”
Tracey McDermott, FCA Director of Supervision and Authorisations
This month the FCA have published their finalised guidance on Social Media and Financial Promotions in FG 15/4 “The FCA’s supervisory approach to financial promotions in social media.”
Since consulting on the subject last August, the FCA continues to recognise that social channels of communication offer significant value to firms by offering an important and useful tool of communicating and engaging with customers. However, in its most recent guidance, the FCA reminds firms that they must remain mindful of the intention and compliance of all communications, including via Social Media, as these all have the capability of being a financial promotion.
With the rules in mind, the FCA sets out to clarify that all communications must be clear, fair and not misleading, and for financial promotions, must additionally contain required risk and warning statements.
Social Media covers a wide variety of online and digital mediums from the social networking sites like LinkedIn, Facebook, Twitter and Google+ to online blogs, forums and video and image sharing sites such as Pinterest, YouTube, Instagram, Vimeo and Vine.
In summary, a financial promotion is an invitation or inducement to engage in investment activity that must also be made ‘in the course of business’ for it to come under the FCA’s regime.
Invariably, if there is a commercial interest on the part of the communicator, then this would be considered to be ‘in the course of business.’ Additional information on ‘in the course of business’ can be found in the FCA’s published guidance in the Perimeter Guidance manual (PERG).
Should a firm’s employee use their own personal social media account to send communications that are also an inducement or invitation, then these will also be considered a financial promotion and would therefore be subject to the same rules that apply to the firm. For example, an employee may say something promotional about their firm in a bid to obtain more clients or business for their employer. Here their comments would be considered an inducement and they would have a commercial interest in the communication so would be acting in the course of business.
***The key factor is the purpose of the communication rather than who is making it and there has to be a commercial interest on the part of the communicator***
Firms and individuals should take care to clearly distinguish personal communications from those that are, or are likely to be understood to be, made in the course of that business, where a personal social media account is used by someone associated with the business.
A fundamental requirement for all communications by firms, including those of financial promotions, is that they are clear, fair and not misleading. As such, it is important that promotions are clearly identifiable as promotions, including upon social media. Firms can ensure that they comply by labelling the promotion as such, or by making it clear from the context of the content.
Note: The FCA have stressed that hashtags such as #ad or #promotion are not appropriate to identify promotional content, as hashtags in themselves, are clickable and could cause potential customer confusion by taking them to a page that is largely irrelevant and outside the control of the firm.
The requirement for fair and not misleading communications imply that a 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.
Therefore, the FCA reminds firms of the requirements to include risk warnings or other statements in promotions for certain products and/or services even is this is challenging due to size or space limitations imposed by social channels.
Often, social media platforms oppose their own limitations upon the content that can be posted upon them, such as a strict character limitation (140 characters for a single Tweet) or a time or size limit such as a maximum 6 seconds of video upon Vine.
A common way of dealing with these limitations is to provide a link to another page or website within a social post so that a customer can access more information without a strict limitation. For example a tweet might provide a link to the firm’s website. However, the FCA have stressed that each communication must comply separately with any specific requirements, as well as being clear, fair and not misleading, so in this instance, both the tweet and the website page to which it links must each comply.
Another possible solution to the problem of character limitation is to insert images or infographics into social communications such as tweets. This allows relatively unrestricted information to be displayed to the viewer and of course, these images must in themselves be compliant with FCA requirements.
However, images may not always display to users of social media and instead the image may only display as a link. This can often be dependent upon individual user settings or the restrictions of using scheduling platforms such as Tweetdeck and Hootsuite. In these instances, if it cannot be determined by the firm that the image will always show, then both the invitation or inducement and the risk warning or balancing statement would need to be provided within the inserted image.
With social media comes the possibility that a firm’s communications can be shared very quickly with a wider audience outside of the original intended recipients. As such, firms should be very mindful of this and ensure that their original communications are compliant and would remain clear, fair and not misleading even in front of non-intended recipients.
Whilst the sharing of a firm’s communication by others is not the responsibility the firm, they are responsible for the compliance and content of the original message.
However, should a firm choose to share another person’s social communications, such as a customer endorsement, then they should again be mindful whether they have a commercial interest in sharing the comment, and if this constitutes a financial promotion.
The following two examples, provided by the FCA, show examples of a compliant and a non-compliant communication on a character limited social platform.
Example 1: “To see our current UK equity fund range, go to www.FirmXYZ.co.uk”
Example 2: “To see our top-performing UK equity fund, go to www.FirmXYZ.co.uk ”
The content of Example 1 is compliant as the main message contains only signposting language and does not itself create a financial promotion. Example 2 however is non-compliant as the inclusion of the wording ‘top-performing’ changes the communication to an inducement, and would therefore require a past performance warning and five year table for it to be compliant.
As such, the FCA suggest that firms may wish to ensure that the initial tweet or post does not contain any ‘trigger’ information but merely links through to a web page where all the information and risk warnings can be then shown together in a non-limited setting.
Furthermore, the FCA reminds firms that they need to have an adequate system in place to record the sign off and approval of digital communications by a person of appropriate competence and seniority and that they must maintain their own records of communications separate to having any reliance on digital and social media channels.
Non-real time promotions
The FCA also clarified that social communication such as tweets are unsolicited and considered non-real time promotions. Non–real time promotions are where a record of the communication is created and is directed at multiple recipients and does not require the recipient to respond immediately. As such firms are reminded that these promotions are also subject to the FCA’s conduct of business rules.
Financial Promotions: Communicating via Social Media