The Financial Conduct Authority (FCA) has issued new guidance to ensure that financial promotions on social media platforms are fair, clear, and not misleading. The regulator scrutinized the latest forms of network marketing, including memes, reels, and gaming streams.

The move comes as social media becomes increasingly important in firms' marketing strategies.

FCA Cracks Down on Misleading Financial Ads on Social Media

The FCA has warned both firms and influencers that they must adhere to the rules when promoting financial products on social media. Influencers promoting a financial product without approval from an FCA-authorized person with the right permission could commit a criminal offense.

As a result, every reel and meme encouraging investment, for example, in cryptocurrencies, will soon be able to be scrutinized for compliance with regulations.

Lucy Castledine, the Director of Consumer Investments at the FCA, emphasized that promotions are not just about likes but also about the law. She warned that the FCA will take action against those touting financial products illegally.

“Any marketing for financial products must be fair, clear, and not misleading so consumers can invest, save or borrow with confidence,” Castledine added.

For example, in stories and carousel posts, the risk warning may be easily overlooked if it is significantly smaller than other content or only appears on the last slide. Similarly, in livestreams, if the streamer fails to mention the risk warning while promoting the financial product, viewers may not be adequately informed. In character-limited media, truncating the risk warning to the point where it no longer complies with applicable rules can also be problematic.

Here is one of the examples of what promotional materials look like (left) and how they should look (right), according to the FCA:

The FCA reported that it wanted to control better advertisements on social media and the activities of financial influencers, or influencers, in the middle of last year. The guidelines proposed at that time regarding social media were set to modernize the information companies should use to promote financial products or services online.

Complex Products May Not Be Suitable for Social Media

The FCA has also cautioned that social media may not always be the best place to promote complex financial products. Firms need to consider whether platforms with limited characters or space are appropriate for such promotions.

The FCA has increased its scrutiny of financial promotions, removing over 10,000 misleading adverts last year, up from around 8,500 in 2022. The regulator continues working with the Advertising Standards Authority to educate consumers and influencers about the risks of promoting financial products.

The regulator issued a larger number of consumer alerts about potential scams last year. “For unauthorized firms and individuals, we issued 2,285 alerts in 2023, an increase of 21% from 1,882 in 2022,” the FCA commented. The FCA already published part of this data in February.

Back in late December, the FCA revealed that it canceled almost 1,300 unauthorized firms in 2023 and imposed record fines totaling £52,802,900.