The FCA is consulting on a social media guidance paper warning firms to be “fair, clear and not misleading”.
The 15-page paper, Social Media and Customer Communications: the FCA’s Supervisory Approach to Financial Promotions in Social Media, comes alongside the launch of the Social Media Charter, a body established to promote social media standards in financial services.
Clive Adamson, director of supervision for the FCA said: “The FCA sees positive benefits from using social media, but there has to be an element of compliance. Primarily, what firms do on social media must ensure customers are at the heart of their business.
“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. We recognise social media are constantly evolving.”
The FCA paper, which addresses social media, includes warnings to “distinguish clearly personal communications from those that are, or are likely to be understood to be, made in the course of that business” and to include risk warnings when promoting high-cost, short-term credit.
Advertisements should also adhere to the Advertising Standards Authority’s committee of advertising practice code, the City watchdog has said.
|Other regulatory issues in the consultation|
|Sharing or forwarding communications|
|Real time and digital media|
|Approval and record-keeping|
Earlier this year, consultancy Capgemini noted in its 36-page World Banking Report that social media was on its way to becoming a “bona fide channel for executing transactions”.
Steve Hagues, the founder of Harrowgate-based Foundation Resourcing, warned members of his Adviser Academy to take care with using social media. He noted that tweets were monitored by the City watchdog and that social networking came with risks. He said: “Yes, it is a brilliant engagement tool - but it is a two-way street and it can lead to unintended consequences.
Firms have until 6 November to take part in the consultation.
Gillian Roche-Saunders, head of venture finance for financial services consultancy Bovill, said: “Crowd funding platforms and other financial services firms have been left completely in the dark until now about how they should use social media to market their investments.”
“Firms have been forced to apply out-of-date guidance that was intended for traditional adverts to promotions on social media that reach consumers directly and create new challenges like keeping a promotion to 140 characters.”
Matthew Walne, managing director of Leicestershire-based Santorini Financial Planning, said: “I can’t understand why anyone would want to send generic or detailed advice to a mass audience when you want someone to pay for it.”