FCA to revamp social media guidance on financial promotions

In a consultation today, the FCA said it is carrying out additional work to combat illegal and non-compliant financial promotions.

The latest proposals, which build on the FG15/4: Social media and customer communications guidance from March 2015, will modernise the information firms should use when promoting financial products or services online. 

For example, the regulator is reminding firms that any form of communication - including through social media - is capable of being a financial promotion if it includes an invitation or inducement to engage in investment activity. 

This will include communications through ‘private’ or invitation only social media channels like chatrooms such as Discord and Telegram. 

It said authorised persons must comply with rules when communicating or approving financial promotions and ensure they are generally subject to the requirement to be fair, clear and not misleading. 

Promotions that fail to meet this standard can cause consumers to buy products and engage in services that aren’t suitable for their needs, leading to poor outcomes for them. 

The FCA also said communications through social media can reach a wide audience very rapidly and when designing their financial promotions, firms should carefully consider the way material on social media is distributed.

“We expect financial promotions to be standalone compliant,” it said. 

“This means that each stage of a financial promotion must comply with our rules. “

However, promotions of complex financial products might require additional supporting information or disclosure to enable consumer understanding. 

In this case, firms may include supporting hyperlinks or separate pathways for a consumer to access this. 

Links to additional information should be clearly and prominently brought to the consumer’s attention and should give consumers enough information to make an informed decision. 

Elsewhere, the FCA also reminded firms that there are requirements to include risk warnings or other statements in promotions for certain products/services. 

These rules are media neutral, so apply to social media as they would any other channel. 

“We expect risk warnings on social media to be clear, prominent and without a design feature that reduces their visibility or prominence,” it said. 

“Firms should be aware that specific sectors have more prescriptive risk warning requirements and firms should familiarise themselves with these rules before communicating or approving financial promotions on social media.” 

Where rules allow shortened risk warnings, firms should ensure the shortened clause is clearly visible, and the full warning is included after click-through.

Lucy Castledine, director, consumer investments at the FCA, said: "We’ve seen a growing number of ads falling short of the guidance we have in place to stop consumer harm. 

"We want people to stay on the right side of our rules, so we’re updating our guidance to clarify what we expect of firms when marketing financial products online.

"And for those touting products illegally, we will be taking action against you."

Further action

The FCA has been ramping up its scrutiny of online, often illegal, financial promotions, recognising the significant increase in notoriety of ‘finfluencers’ and the potential for consumer harm taking place online.

The FCA has also teamed up with the Advertising Standards Authority to help educate consumers and influencers about the risks involved in promoting financial products. 

This work has included an infographic, roundtable discussions and live events to build up awareness of the harm that can take place.

The City watchdog said its engagement has also helped secure changes to the advertising policies of several Big Tech companies to only allow financial promotions that have been approved by FCA-authorised firms. 

The consultation follows the announcement of new advertising rules for crypto firms marketing to UK consumers. 

From October 8, 2023, the FCA will ban incentives to invest in crypto, such as ‘refer a friend’ bonuses. 

Firms must also introduce clear risk warnings and a 24-hour cooling period to give first-time investors the time to consider their investment decision. These measures are similar to the regime in place for other high-risk investments. 

Myron Jobson, senior personal finance analyst at Interactive Investor, said: “The regulator rightly has its sights set on the role of social media in propagating inaccurate and misleading information relating to finances as well as rogue financial promotions. Social media is a blessing and a curse. 

“It provides a platform to share opinions and there is some good material out there, but there is also garbage content that frankly shouldn’t see the light of day.

“The advent of so-called finfluencers is a headache for the city regulator. The credentials of many so-called finfluencer are weak at best – if they exist at all. But there are also a number of well-versed and highly qualified financial professionals on social media offering solid guidance.”

Meanwhile, Rosie Hooper, chartered financial adviser at Quilter, said the consultation is making it harder for promotions to be approved and is cracking down on harm occurring from unauthorised influencers communicating illegal financial promotions via social media.

“This is long overdue given the spate of social media posts over a number of years that have lured people into high-risk schemes that don’t state the real risks of falling victim to scams on social media which have skyrocketed over recent years,” she said.

“This crackdown is particularly needed during the cost-of-living crisis as people are more likely to turn to alternative sources with the promise of high returns being tempting for cash-strapped individuals without their eyes open to risks involved.

“The incoming consumer duty raises expectations of firms communicating financial promotions on social media higher than ever before. 

“However, the powers of the FCA only goes so far and will not be enough to stop outright scammers.”

Hooper said the importance of legislation to make social media platforms responsible for taking down scam ads in a timely manner via the online safety bill is paramount. 

“Stopping scam adverts when people’s cash is so stretched should be a priority for the government,” she said. 

sonia.rach@ft.com

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