Your IndustryJun 4 2015

Ramifications of failing to obey FCA’s rules

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The FCA recognises the power social media has and that advisers want to use it, says Richard Ardron, marketing director of SimplyBiz Group. He says the regulator has said they do not wish to prevent advisers from using social media.

Mr Ardron says key to compliance for advisers is the sign-off and record-keeping requirements apply to digital (including specifically social) media in the same way as to print, broadcast and outdoor media.

If you breach the FCA rules on financial promotions, Sue McLean, technology and outsourcing lawyer at international law firm Morrison & Foerster, warns the regulator may take disciplinary against you.

In addition, she says any agreements entered into by a consumer as a result of that unlawful financial promotion will be unenforceable against that consumer.

Ms McLean says you could also face reputational damage and other potential legal claims including for misrepresentation or breach of consumer protection law.

In terms of the exact area of law, Ms McLean says failure to meet the FCA’s social media requirements could result in a breach of the restrictions imposed by section 21 of Financial Services and Markets Act 2000, which governs financial promotions.

Helen Turner, distribution and development director of Tenet Group, says legal sanctions could mean advisers face up to two years of imprisonment, an unlimited fine or both.

Ms Turner says: “Please remember that it is what you say and how you say it, rather than the method of communication that determines whether it is a financial promotion.”

Michael Ruck, senior associate for law firm Pinsent Masons, says firms are best advised to consider all regulatory requirements and not seek to limit any consideration to only those they consider apply to social media specifically.

For example, he says if the communication is not ‘clear, fair and not misleading’, it would contravene principle seven of the FCA’s Principles for Business.

Mr Ruck says breaching such a principle makes a firm and its senior management liable to regulatory and disciplinary sanctions.

In addition, Mr Ruck says any form of communication, including through social media, is capable of being a financial promotion, depending on whether it includes an invitation or inducement to engage in financial activity.

If a firm breaches the financial promotion rules, he says the court may grant an injunction or make an order to ensure the person making the communication and any other person knowingly concerned remedies the contravention or restores the affected party in the position it was before the agreement.

But Mark Loosmore, executive general manager (wealth) of Iress, urges advisers to not feel down about these rules and argues the FCA’s guidelines for using social media are not restrictive.

If advisers simply take note, use social media correctly and think about their audience before sharing thoughts and ideas, Mr Loosmore says social media can play a huge role in taking client relationships forward.