The FCA Outlines Do's & Don'ts in Social Media Financial Promos

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) Financial Conduct Authority (FCA) The Financial Conduct Authority (FCA) is the largest financial regulator for all financial markets in the United Kingdom (UK).The UK regulator is responsible for the conduct of firms authorized under the Financial Services and Markets Act 2000. Moreover, the FCA is also responsible for the regulation of behavior in retail and wholesale financial markets, supervision of the trading infrastructure that supports those markets, and the prudential regulation of firms not regulated by the PRA. Its rol The Financial Conduct Authority (FCA) is the largest financial regulator for all financial markets in the United Kingdom (UK).The UK regulator is responsible for the conduct of firms authorized under the Financial Services and Markets Act 2000. Moreover, the FCA is also responsible for the regulation of behavior in retail and wholesale financial markets, supervision of the trading infrastructure that supports those markets, and the prudential regulation of firms not regulated by the PRA. Its rol Read this Term) 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 Compliance In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a Read this Term 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.

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.