As the popularity of social media advertising channels is growing, and just as major companies in the space are reporting record earnings after years of skepticism from tech pundits, the Financial Conduct Authority (FCA) has launched a consultation, which aims to clarify the regulator’s approach to the supervision of financial promotions on social media.
The set of challenges presented by the firms’ usage of social media for their communications with customers have created a set of compliance difficulties with some of FCA’s rules. The UK regulator has outlined the financial promotion rule for character limited forms of social media, namely Twitter. With the SEC already having issued a fine in relation to an ill-thought-out tweet, the FCA is taking the initiative to clarify compliance issues for companies using these channels to communicate with existing and prospective customers.
Guidance Consultation Paper
The regulator has issued a guidance consultation paper which contains examples of acceptable and unacceptable financial promotions, which is published on the FCA’s website. The main principle employed by the regulator is not to misuse the social media’s messaging brevity, in order to draw a misleadingly incomplete picture by emphasizing positive aspects and downplaying risks.
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According to the definitions set out by the FCA, social media include, but are not limited to blogs, microblogs, social networks, forums, image and video-sharing platforms (YouTube, Instagram, Vine, Pinterest). With a number of social media imposing character restrictions, including Twitter with its 140 characters and Facebook adverts which have 25 characters for the headline and 90 characters for the body text, complying with existing regulations can be challenging.
FCA’s Official Stance towards Social Media Affirmative, but with Conditions
The FCA states its recognition that social media are powerful channels of communication and possess significant value to companies. While the UK regulator does not want to prevent their use, as such media open a direct communications channel for customers, it aims to remind companies that any form of communication can constitute a financial promotion, depending on whether it includes an invitation or solicitation to engage in financial activity.
FCA’s Director of Supervision, Clive Adamson, stated, “The FCA sees positive benefits from using social media but there has to be an element of compliance. Primarily, what firms do on social media must ensure customers are at the heart of their business. Our overall approach is that financial promotions, whether on social media or traditional media, should be fair, clear and not misleading. We have had extensive industry engagement on this issue and we believe our guidance is a sensible approach that doesn’t affect industry’s ability to innovate using new forms of media. We recognize social media are constantly evolving. We, therefore, welcome feedback to today’s consultation and look forward to continuing the discussion with industry.”
For the full consultation paper on the following matter is a link to FCA’s website.