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FCA regulation of social media activity

This article is part of
Guide to Social Media

The FCA is ‘media neutral’ so social media is viewed as any other type of communication, warns Helen Turner, distribution and development director of Tenet.

Ms Turner says Tenet recommends social media is treated in the same way as a company brochure or website and is approved by an appropriate compliance officer. Appointed representatives will need to follow the rules set by their principal, she adds.

Ms Turner says a demonstrable social media policy should be in place and a record of all social media activity should be kept. Your policy should include who, for example, your firm will allow to post on social media and your controls.

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If content being posted does constitute a financial promotion, Ms Turner says the appropriate risk warnings should be used. Given the character limitations of Twitter, she says it is generally not an appropriate medium for financial promotion communications.

Ms Turner says advisers should also remember advertising standards will also apply in such circumstances.

But Richard Ardron, marketing director of SimplyBiz Group, says social media is about conversation, not promotion. The FCA’s rules on social media are focused on financial promotions, he notes.

In March 2015 the regulator said they do not want to prevent social media use but ensure that consumers are protected. The overarching principle the regulator spelt out is all communications with consumers must be “fair, clear and not misleading”.

Any form of communication made by a firm is capable of being a financial promotion, but the key to whether it is pushing product according to the regulator is whether it includes an invitation to engage in financial activity.

Some communication will not include an invitation to engage in financial activity - for example, communications solely relating to the firm’s community work, the regulator states.

Also, firms may be able to advertise on social media through image advertising, which is less likely to cause compliance issues.

An image advertisement - an advert that only includes the name of the firm, a logo or other image, and a reference to types of regulated activities provided by the firm or its fees - may be exempt from financial promotion rules, but the FCA states it will still need to be fair, clear and not misleading.

Sue McLean, technology and outsourcing lawyer at international law firm Morrison & Foerster, says advisers should note that only financial promotions made “in the course of business” will be subject to the FCA rules. However, she says this is viewed pretty broadly.

For example, Ms McLean says even where an adviser is using their own social media account rather than a firm account, if they are posting communications that could be considered an inducement or invitation to engage in financial activity, this could constitute a financial promotion and be subject to the rules.

The FCA’s March 2015 guidance also deals with the use of risk warnings on social media and the use of hashtags and re-tweets, which is covered indepth in a later article in this guide.