Posted by Cognito on Wed, Sep 03 2014

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Compliance (That's What They Want)

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Earlier this summer the UK financial services regulator, the Financial Conduct Authority, released a guidance consultation to better clarify its approach to the supervision of financial promotions in social media, including the use of character-limited forms such as Twitter or Vine. This is not the first time a FS regulatory body in the UK has issued guidance on social media; in 2010, the (then) Financial Services Authority issued a set of guidelines focused primarily on financial promotions through “new media.”

As a follow up to our previous post on SEC/FINRA rules for social media, we wanted to provide an overview of the FCA’s latest proposed guidance for financial services firms in the UK:

Financial Promotions

Firms are reminded that any form of communication (including through social media) is capable of being 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. In addition, financial promotion for investment products must be clearly identified as such. One generally accepted way to do this, for character-limited media, is the use of #ad in online posts.

Fair, Clear and Not Misleading

Firms are required that all communications be fair, clear and not misleading. Firms should therefore ensure that their original communication would remain fair, clear and not misleading on social media, even if it ends up in front of a non-intended recipient (through others re-tweeting on Twitter or sharing on Facebook). A way of managing this risk is the use of software that enables advertisers to target particular groups very precisely. In addition:

  • Firms 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’.
  • Promotions over social media must also be able to meet FCA’s rules on prominence.

Stand-Alone Compliance

Each communication (e.g. a tweet, a Facebook insertion or page, or web page) must be stand-alone compliant, regardless of their form, content, location or target audience. It remains the responsibility of the firm to assess what information they need to include in a promotion in order to ensure compliance with previously established rules and guidance.

Risk Warnings and Other Required Statements

Just as they would for any other medium, firms are required to include risk warnings or other statements in promotions for certain products/services using character-limited social media. One solution to the problem of character limitation is to insert images, such as infographics into tweets, which allows relatively unrestricted information to be conveyed. However, where the financial promotion triggers a risk warning or other information required by our rules this cannot appear solely in the image. 

Image Advertising

“Image Advertising” Is defined in the FCA Handbook as advertising that consists of the name of the firm, a logo or other image associated with the firm, a contact point and a reference to the types of regulated activities provided by the firm or to its fees or commissions. The FCA reminds firms that it remains possible to advertise their presence in the market through ‘image advertising’ in a way which is unlikely to present difficulties with character limits, however the image itself and any text associated with the image, should also be compliant.

Recipients Sharing or Forwarding Communications

Where a recipient shares or forwards (such as by re-tweeting) a firm’s communication, responsibility lies with the communicator, not the firm itself.  Likewise, where a firm re-tweets a customer’s tweet (for example, one expressing satisfaction with the service received from the firm), the firm is responsible as the communicator, even though the firm did not generate the content of the communication.

Real Time and Digital Media

Whether a financial promotion is considered real time or non-real time has implications for the rules that are potentially engaged, where the promotion is unsolicited. A promotion is non-real time and therefore subject to the FCA’s conduct of business rules where it creates a record of the communication, is directed at multiple recipients, and does not require the recipient to respond immediately. A tweet, for example, would be considered a non-real time promotion. Digital media communications take place in real time, but may not fall within the definition of ‘real-time’ communication under article 7 of the Financial Promotion Order (FPO).

Approval and Record-Keeping

Firms must have an adequate system in place to sign off on digital media communications, which should be done by a person of appropriate competence and seniority within the organization. Firms must also keep adequate records of any significant communications, and should not rely solely on digital media channels to maintain such records.

Advertising Standards Authority

Advertisers are required to adhere to the Committee of Advertising Practice Code, which applies to ‘non-technical’ elements of financial advertising, for example matters of social responsibility, harm and offence.

The guidance, which is currently open to consultation and comments, will close on November 6, 2014. In addition, the FCA has set up #smfca for those wishing to discuss the publication on Twitter.


Compliance, Financial Communications, Going Social, Regulation, Social Media,
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