InvestmentsMay 12 2014

Tech Report: Social media - How to stay FCA compliant

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This is the pressing question advisers must ask – and for many, fear of coming to the wrong conclusion means erring on the side of caution and abstaining completely. Some firms go to even greater lengths and ban employees outright from using social media for business or from referencing their work on social networking sites they use in their personal life.

Let’s get one thing straight; the regulator is not anti social media. In fact, the FCA itself has a Twitter account (@TheFCA) and in its January 2014 ‘Regulation Round-Up’ sought feedback from users on “which other social media you think we should use”.

However, the FCA acknowledged the need for greater clarity on financial regulation and firms’ use of social media, and in response to increased questions from firms – rather than due to any specific concerns – new FCA guidance on social media is expected imminently (it was due in Q1 2014).

Compliance conundrum

Until then, the FCA’s financial promotion rules (COBS 4, BCOBS 2 and MCOB 3) apply across all media, making no distinction between local newspaper advertisements, a blog or social media post.

A financial communication that merely informs or educates will not normally be considered a financial promotion but must always be fair, clear and not misleading. A financial promotion is where a person, in the course of business, “communicates an invitation or inducement to engage in investment activity”. It is this last point that has advisers worried about social media engagement.

But social media-savvy advisers such as Martin Bamford, managing director of Informed Choice, argue “compliance with the FCA guidance on social media is clear and straightforward, and in any case it is surprisingly difficult to make a financial promotion on social media channels. It just doesn’t work like that”.

Ways to stay compliant

There is a variety of approaches to social media, and concerns about accidentally making financial promotions via social networks reveals a one-way communication mentality (“I’m using this medium to tell you something, to sell something”) that is the antithesis of online social interaction.

Discussing changes to taxation, considerations for estate planning, revealing factors you consider when selecting investment funds and offering other food for thought to clients via social media channels, need not breach current FCA guidelines.

Adviser firms can allay their fears by introducing a clear social media strategy for each platform. This should outline your aims (why you’re on the platform), intended audience, intended content to share, success measurement, and resourcing. A social media policy, outlining what is and is not permitted on company (and to some extent personal) social media accounts by employees, can easily be added to staff contracts to highlight social media accountability. This also shows a concerted effort to use FCA-compliant social media practices at the firm and can be used as evidence in any FCA enquiry.

Mr Bamford concludes: “Some adviser firms, particularly large networks and nationals, have applied a very strange interpretation of the FCA guidance on social media. If you treat social media like any other interaction with members of the public, you remain compliant with no need for draconian restrictions on its use. I suspect what large firms really fear from social media is their advisers becoming softer targets to recruiters, or delivering messages which are somehow inconsistent with corporate strategy.”

Anna Lawlor is director of Social i Media

COMPLYING WITH THE FCA

Things to consider:

• The content you post should be truly informative and relevant to the audience you have in mind. Draw on previous experience with clients – the typical questions they ask, the financial concerns they share – and base your original content on addressing these in broad, generic terms.

• Pick the right social media platform for the task: Twitter’s 140-character limit might make it better as an in-bound source (staying in touch with peers, events and industry news), while a longer blog, video or slide-share might be more suitable for more in-depth insights.

• Some financial services firms provide a link to an FCA disclaimer in the profile section of their social media accounts. This is not a fail-safe compliance tactic and has not been commented on by the FCA, but does show regulatory awareness in the use of social media. However, the content of the account must also reflect this.

• Any conversations on social media platforms that pose a potential regulatory breach, such as requests for specific advice, should be taken offline by offering a simple explanation of the regulatory parameters within which advisers deliver advice.

• Perform regular reviews of content on your social media platforms. Any out-of-date guidance, views or information should be removed or updated. Be aware that publicly-available content could be returned by a search engine and read out of the context you may have intended. This may be a key concern for the FCA.

• Be very aware of privacy settings. Anything posted to Twitter is automatically public and searchable, and publishing carries the same legal responsibilities as traditional publishing, such as copyright and defamation. Sites such as Facebook and LinkedIn offer a variety of public, private and hybrid (select group) sharing functions, so do not simply rely on default privacy settings.

• Use different secure passwords (formed of upper/lower case, numbers and signs) for each online account to make them more secure from hacking threats. A password manager such as LastPass auto-generates secure passwords and can securely store your range of passwords.

COMPLIANCE RESOURCES

http://www.asa.org.uk/

http://www.unbiased.co.uk/compliance-and-social-media

http://www.fca.org.uk/

http://www.cap.org.uk/Advice-Training-on-the-rules/Advice-Online-Database/Remit-Social-Media.aspx