FCA warns finfluencers to be on 'right side of rules' with social media ads

The regulator published guidance today (March 26) to provide clarification of what it expects from firms and influencers when it comes to financial promotions on social media, especially when it comes to memes, reels and gaming streams promoting financial services.

It said it expects adverts to be fair, clear and not misleading and must have a balanced view of the benefits and risks as well as be compliant. 

The FCA has not introduced any new rules or penalties for those who post misleading content and instead has used the guidance to provide more examples of when social media posts are classed as compliant or not.

In the guidance it said firms should consider factors such as their target audience, what recipients need to know, the kind of decision to be made by recipients and where confusion could arise in determining how to support consumer understanding. 

Risk warnings

The FCA also said some promotions will require specific information such as a risk warning with this to be displayed prominently. 

Firms should also be aware of any additional requirements for how this is required to be displayed.

It said: “In promotions for high‑risk investments, we expect the prescribed risk warning to be displayed throughout the promotion and not to be obscured or truncated by a design feature of the social media platform.”

The regulator said under the consumer duty, financial promotions must support customer understanding and communicate information in a way that equips them to make effective decisions. 

Therefore it wants firms to consider the guidance alongside their obligations under the duty to deliver good outcomes for customers.

It warned promotions that fail to meet its standards could cause consumers to buy products and engage in services that are not suitable for their needs leading to poor outcomes. 

Lucy Castledine, director of consumer investments at the FCA, said: “Promotions aren’t just about the likes, they’re about the law. We will take action against those touting financial products illegally.”

‘Finfluencers’

The FCA has also highlighted firms working with affiliate marketers such as influencers should take “proactive” responsibility for how their affiliates communicate financial promotions. 

This includes having appropriate monitoring and oversight systems in place to ensure affiliates understand their responsibilities and do not communicate illegal or non‑compliant
financial promotions. 

The FCA has warned firms still remain responsible for the compliance of every promotion they made or “cause to be made”.

Unauthorised persons like ‘finfluencers’ who promote financial products or services that are subject to regulation without the approval of an FCA authorised person may be committing a criminal offence, according to the regulator.

Even if an influencer does not have an affiliation with a firm, the FCA has still stated their communications on social media about financial products or services may still be subject to the financial promotion restriction and require approval.

The FCA said: “Social media will not always be the best place to promote complex products. Firms need to consider whether a platform that offers limited characters or space is the right place to do so. Scrutiny of financial promotions has been ramped up and last year we removed over 10,000 misleading adverts, up from around 8,500 in 2022.”

Laura Suter, director of personal finance at AJ Bell, said the regulator is trying to tackle a “very large and hard to grasp beast” by bringing in tighter regulation on social media posts. 

“There has inevitably been a surge in paid-for promotions of financial products, particularly cryptocurrencies, in recent years. We know that social media plays a huge part in people’s research of investment products, particularly among younger, newer investors.

“Finfluencers can help to explain key concepts like compounding and the importance of saving for the future in an engaging way that could in turn enable people to make better-informed financial decisions.

“But there is a darker side to many of these posts, and a significant risk of finfluencers spreading misinformation or encouraging high-risk behaviour, such as day trading in individual stocks, without properly explaining those risks. 

“There’s a real danger that financial social media becomes a Wild West, rather than a space to get accurate, clear information on financial planning.”

alina.khan@ft.com