The UK Financial Conduct Authority today issued proposed guidance intended to clarify its approach concerning the supervision of financial promotions in blogs and social networking Websites, including those that have character space limitations, such as Twitter.
The FCA reminds companies that any form of communication, including through social media, potentially constitutes a financial promotion, depending on whether it includes an invitation or inducement to engage in financial activity. “Therefore, it remains a fundamental requirement that all communications, including financial promotions, are compliant,” the FCA stated.
In a prepared statement, Clive Adamson, Director of Supervision at the FCA, acknowledged that positive benefits can be gained from using social media, “but there has to be an element of compliance,” he said. “Our overall approach is that financial promotions, whether on social media or traditional media, should be fair, clear, and not misleading.”
The requirements to be fair and not misleading imply balance in how financial products and services are promoted, so that consumers understand not only the potential benefits but also any relevant risks, the FCA stated. “Companies should consider the appropriateness of character-limited media as a means of promoting complex features of financial products or services.”
It may be possible to signpost a product or service with a link to more comprehensive information, provided that the promotion remains compliant in itself. Alternatively, it may be more appropriate to use “image advertising.”
The consultation paper sets out in detail specific areas that companies need to consider, and provides examples of acceptable and unacceptable financial promotions, including:
Promotions for investment products. Financial promotions for investment products must be identifiable as such. “The FCA’s view is that—for social media, in particular—it is important that, in all cases, it is clear that a promotion is a promotion,” the agency stated. “One generally accepted way to do this, for character-limited media, is the use of #ad in online posts.”
Stand-alone compliance. Each social media communication needs to be considered individually, and comply with the relevant rules.
Risk warnings and other required statements. The FCA reminds companies that they must include risk warnings, or other statements, in promotions for certain products or services. These rules are media-neutral and, therefore, apply to social media as they would to any other medium. “When taken into account with the supervisory approach to standalone compliance, this poses particular challenges for the use of character-limited social media,” the FCA stated.
According to the FCA, one solution to the problem of character limitation is to insert images— such as info-graphics into tweets, which allows relatively unrestricted information to be conveyed. Where the financial promotion triggers a risk warning or other information required by FCA rules, however, this cannot appear solely in the image.
Image advertising. The FCA further reminds companies that it remains possible to advertise their presence in the market through image advertising in a way that’s unlikely to present difficulties with character limits.
The FCA said it developed its proposed guidance following engagement with other regulators both in the UK and overseas, as well as with other interested stakeholders. The FCA also said it has engaged in “extensive conversations” with industry over the past 18 months to better understand their concerns around the use of social media.
The FCA’s consultation closes on Nov. 6, 2014.