Financial promotions over social media platforms are a matter of much contemplation since the past few months. While more companies want to take advantage of social media platforms for managing client communication, they face some restrictions with promotions due to FCA rules, finding compliance with them difficult. Over the last 18 months, the industry and FCA was in extensive conversation repeatedly to find a way out of this problem and finally, at the start of August 2014, FCA launched a consultation on this matter.
In this consultation, the Financial Conduct Authority has clarified its approach on how it intends to supervise financial promotions on social media in the future. According to the FCAs Director of Supervision Clive Adamson, financial promotions, whether they are done through traditional media or social media, should be fair and clear, and not misleading in any way. He also stated that the consultation presented by FCA was open for feedback and they will be continuing further discussions with industry personnel on this consultation in the future.
The Overall Approach of FCA
The overarching principle focused on in this consultation is that all communications through social media with clients, especially those involving financial promotions should not be misleading. Clear and fair promotional messages should be given to all customers. Some sector-specific requirements are also included in addition to this basic principle.
The FCA wants companies to provide consumers certain minimum information though fair and balanced messages, which makes their promotional rules media-neutral. FCA claims to understand the importance of social media platforms and the power of company-client communication that ensues on these platforms so it has no intensions of preventing this communication.
However, the FCA outlines that any form of communication between client and company can turn into a financial promotion if it extends an invitation or induces consumers to engage in a financial transaction or activity. Therefore, the FCA requires that the entire communication between consumers and clients should be compliant to the regulations, whether or not they can be categorized as explicit financial promotions.
Also, since social media platforms have a global reach, the companies should take in account the audience and nature of their promotion carefully before they decide to promote on social media. This means that even if their promotions are visible to non-intended audience, it remains fair and clear, and not misleading.
The FCA demands financial promotions to be fair and clear in the sense that they make consumers aware of not just the potential benefits but also of relevant risks. This means that firms, when using character-limited media for financial promotions, should imply a balance and if the intended balance cannot be achieved, they should reconsider the appropriateness of such media for the promotion of complex features.
If possible, the companies can post the promotion alongside a relevant link that leads to more comprehensive information, or use image advertising. In both cases though, the message itself should be compliant with the basic rules.
Specific Promotional Areas Outlined
The FCA consultation also outlines details for some specific areas that should be considered by firms when promoting financial products on social media. These areas include:
- Investment Product Promotions The FCA specifies that any promotional activity for investment products that involves financial activity should be identified as such explicitly. It should be made clear that promotion is promotion, either by adding a disclaimer or using #ad in character-limited media.
- Individual Compliance The FCA states that every message should be considered for compliance with the relevant rules individually, be it a tweet or a Facebook insertion.
- Risk Warnings FCA clearly outlines that risk warnings and conditional restrictions should always be included in financial promotions on social media for some products and services. This makes promotion through character-limited media a challenge for companies.
- Image Advertising The FCA identifies image advertising as a possible solution for companies who find it difficult to carry out financial promotions in compliance with FCA rules over character-limited media.
This consultation was proposed by FCA after much deliberation and engagement with other regulators, other interested stakeholders and industry personnel. Only when the FCA understood clearly how companies use social media for financial promotions and how invaluable it is for companies did it present this outline, which still remains open for suggestions.