Technology is bright but FCA caution needed

One of the great inventions of the late 20th century was the internet and later forms of digital communication.

This development has transformed our lives beyond belief, intellectually, socially and commercially.

Along with this is a dark shadow following these developments, ranging from the internet becoming a playground for the fraudulent and perverted; but it is the power of the new technology that has driven global financial development at a pace and in ways unimaginable in previous generations.

And, like with all new technological developments, there have been fears of what this would mean for future generations, the same kinds of fears expressed at the invention of the printed word to that of the internal combustion engine.

Sometimes, however, we have to take a step back: just as we are celebrating the wonders of what is still called new technology, most companies and businesses executives are now on the point of abandoning email for the quiet whisper in a dark corridor outside meetings rooms.

The fear of leaving an electronic footprint when we are operating in the shadows of legality or barely ethical business is now a major inhibiting factor.

In some jurisdictions, India and Germany, some senior civil servants have now resorted to using old-fashioned typewriters in order to escape the spies, hackers and investigators trawling through their electronic archives looking for evidence of wrong-doing sometime in the recent past. Lawyers are having a field day.

To make matters worse, just as people are becoming comfortable with avoiding sending messages by email that may later come back to haunt them, the City regulator has intervened on the sensitive matter of the use of social media.

Facebook, blogs, Twitter, YouTube and Instagram, driven by smartphones and other forms of electronic technology, have now become the gods of the secularised world. Blogs, on the other hand, present a totally different problem in that their use is not restricted to a character count and they can – and often are – used simply to express a point of view.

They also present legal challenges, none more so than anonymity, which make some of us who toil in the more traditional media shudder with fear. Quite often there is an appalling ignorance, or even neglect, of the law of defamation by some bloggers and the new media can often be used as a weapon of character assassination by a malicious few.

Despite all this, many of us still feel that some forms of social media can be a passing fad, like VHS and Betamax, which, in time, we will look back on as a footnote in the continuing advance of modern technology.

Many of us still feel that some forms of social media can be a passing fad

Social media lend themselves to two great handicaps: the low barrier to entry means that almost anyone can start tweeting or set up a Facebook account and pretend to be a public intellectual, with views on any and everything; and, one of the crosses we in this neck of the woods have to bear, they may even pretend to be so-called citizen journalists.

One contradiction is that thousands of journalists, from print, broadcast and television, with access to millions of listeners, viewers and readers, still find it necessary to pretend that something they could not say in hundreds of printed words or minutes of broadcast time, still can be properly explained in 140 characters, especially if they want to convince their followers what they have to say is important. It is ridiculous.

Of course, like most things, there are no absolutes and social media can often be useful tools for expanding the public discussional agenda, or even drawing would-be clients to one’s services and products.

There is also the expectation that social media would create an additional public space in which the professional media can be challenged on their veracity. What has occurred, however, is that largely it has often become a tool for self-promotion (YouTube), or self-indulgence.

Frankly, if the new retail regulatory paradigm puts the consumer at the very heart of business, then it follows that 140 characters cannot do customers any favours, no matter how imaginative the writing skills of the author.

But, I fear, a lot of it is over-blown and exaggerated and like most fads will be lost in the mist of time. Of course, a lot of social media can be useful in that it improves communication across boundaries and cultures, have greatly reduced the snail pace of traditional letters and have become tools for new commercial products, all of which are good for us.

One intervention the City regulator should make is to monitor the language and ethical behaviour of those in retail finance addicted to the use of social media.

At a time when the general public is said not to be financially literate, it is important that invitations or offers sent via social (digital) media must form part of any future contract.

It is important that in the mad rush for a competitive advantage firms do not cut corners when it comes to product or service promotion or promises. The exhortation to be fair and not misleading does not go nearly far enough. What is needed is a far more powerful prohibition with a stiff penalty for any infringement.

Nevertheless, there is no doubt that the invention of information and communication technology is for the good, but often the unintended consequences of these developments can catch us wrong-footed.

This is not a manifesto for modern-day Luddites, simply a reminder that progress should have its warning lights on. That is why the City regulator’s intervention is timely.

Hal Austin is Editor of Financial Adviser