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FCA guidance on financial promotions and social media

The FCA has launched a consultation on its proposed guidance explaining how financial promotion requirements apply to promotions on social media.

A clear driver behind the release of the consultation is the FCA's acknowledgement that social media has become an increasingly important marketing tool for firms, allowing them to reach a wide audience quickly when communicating financial promotions. The FCA is also concerned about the rise of financial influencers ("finfluencers") who promote financial products on social media and often target younger audiences.

Key points raised in the draft guidance include:

  • A reminder that any form of communication (including through social media) is capable of being a financial promotion if it includes an invitation or inducement to engage in investment activity. This will include communications through ‘private’ or invitation only social media channels like chatrooms such as Discord and Telegram.

  • Firms must bear in mind their Consumer Duty obligations. For example, when designing a marketing campaign involving a financial promotion, firms need to consider the manner in which material is distributed through social media and take into account that the material may be accessed by a non-intended recipient through third-party sharing.

  • Where a third party shares or forwards communications (for example by retweeting) any breach of the financial promotion rules is still the responsibility of the firm that originally published the financial promotion.

  • When the FCA assesses the compliance of a promotion viewed in a dynamic medium (for example Instagram stories), the FCA will assess the promotion as a whole and take a proportionate view based on the number of frames and where information about risk is displayed. Key information about risk should be displayed upon a consumer's first interaction with the promotion and the warning must be displayed for a sustained period.

  • A reminder that firms must have regard to Principle 3 (a firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems). Principle 3 applies to payments and e-money firms as well as more traditional investment firms and banks. Firms that use influencers to communicate financial promotions on social media should take appropriate steps to ensure any such influencer understands the product or service they are promoting and is aware of the relevant rules.

  • The FCA also expects firms to consider whether social media is appropriate for advertising certain types of products. It is unlikely to be suitable for complex products such as debt counselling.

  • The FCA has expressed concern that consumers are unknowingly being directed to non-UK entities for services where they may not benefit from the protection of UK regulation. The FCA notes that firms should consider mitigating this risk by:
    • separating their social media profiles to have a solely UK-focused profile; and
    • adopting geo location techniques to redirect consumers automatically to the UK firm website or mobile app.
  • Firms must ensure that risk warnings are prominent and the draft guidance includes how firms should ensure that risk warnings are prominent across a number of social media channels including Instagram, Twitter, TikTok and YouTube.

  • The FCA has partnered with the Advertising Standards Authority (ASA) to create an infographic, which is designed to help influencers when they are approached with the opportunity to promote a financial product or service. This infographic encourages influencers to consider whether they are the right person to promote a product or service as well as highlighting when they may be at risk of communicating financial promotions illegally.

  • Firms approving the financial promotions of influencers should pay particular consideration to the influencer’s audience demographics and whether they are likely to have an audience demonstrating characteristics of vulnerability.

The consultation closes on 11 September 2023.

Social media has become an increasingly vital part of firms’ marketing strategies, allowing them to reach a mass audience at increasing speed and frequency. While this has helped firms communicate with consumers more effectively, poor quality financial promotions on social media can lead to significant consumer harm due to their wide reach and the complex nature of financial services.