On 13 March 2015 the FCA published its guidance on financial promotions in social media. In the FG15/4 Social media and customer communications guidance paper, the FCA discusses how firms can use social media in a manner that is compliant with regulatory rules. Below is an overview of the regulator’s guidance and findings:
What is social media?
The Oxford Dictionaries 2013 defines social media as ‘websites and applications that enable users to create and share content or participate in social networking’, websites and applications, being solely digital mediums. To give a few examples, any blog, microblog (Twitter), social and professional network (Facebook, LinkedIn) or video and image sharing platforms (Youtube, Instagram) constitute social media. Social media are particularly powerful channels of communication due to their live communication and their vast reach and exposure, it is for this reason that they are of significant value to firms but are also attached to significant risks to consumers.
What is financial promotion?
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. However, in order to be a financial promotion, the given communication needs to be made ‘in the course of business’, or in other words, be in the commercial interest of the communicator. Therefore, the key factor to consider is what the purpose of the communication is and whether it is inducing, inviting or engaging in financial activity.
For examples of communications which do and do not constitute financial promotions please refer to page 2 of the FG15/4 guidance paper.
Requirements
In the FG 15/4 guidance paper the FCA discussed a number of different requirements attached to financial promotions through social media. One of the main points can be found in Principle 7 of the Principles for Businesses and its requirement that all communications (including financial promotions) are clear, fair and not misleading. To be fair and not misleading implies that there needs to be a balance in how financial products and services are promoted, so that consumers have an appreciation not only of the potential benefits but also of any relevant risks. In order to strike such a balance there are requirement for firms to include risk warnings or other statements in promotions for certain products or services. However, social media may sometimes pose particular hurdles for such risk disclosures due to the character limitations associated with posts, for example, Twitter has a limit of 140 characters per post. Although such limitations may leave little room for risk disclosures they do not exempt firms from non-compliance with the disclosure rules. The FCA notes that advertisers in all sectors, not just financial services, have to work within the constraints of the medium chosen and having a stringent limit on wording is not an excuse.
One possible solution to the problem of character limitation is to insert images, including the use of infographics, into communications such as tweets, which allows relatively unrestricted information to be conveyed.
In regards to the definition of image advertising where the main medium of communication is the image itself, the FCA Handbook provides that ‘advertising that only 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’
- For investments, image advertising is exempt from most of the detailed financial promotions rules and guidance in COBS 4, but it will still need to comply with the high-level ‘fair, clear and not misleading’ rule.
- For mortgages, MCOB 3 contains a specific exemption for financial promotions that comply with MCOB 3.2.5R.
- For insurance and banking, there is no equivalent provision for image advertising in ICOBS 2 or BCOBS 2 and firms cannot rely on exemptions.
- For credit products, CONC 3 applies only to a limited extent to financial promotions or communications falling within CONC 3.1.7R and that comply with the parts of CONC 3 set out in that rule.
It should also be noted that if a recipient/user shares or forwards (such as by retweeting) a firm’s communication (either image or text), responsibility will lie with the communicator for the dissemination of such information, if it is non-compliant with the above discussed requirements.
Conclusion and take away points
The current sign-off and record-keeping provisions in the relevant chapters of the conduct of business sourcebooks in the FCA Handbook apply to digital (including specifically social) media in the same way as to print, broadcast and outdoor media. Beyond that, these matters are a question of risk management by the firm.
The FCA stresses that apart from the guidance and requirements discussed in FG15/4, firms which are considering sending marketing through electronic media are also subject to specific legal requirements that they must comply with when doing so, such as Regulation 22 of the Privacy & Electronic Communications Regulations 2003 (PECR). With regard to unsolicited telephone calls for direct marketing purposes, live (as opposed to automated) direct marketing calls are covered by regulation 21 of PECR.[2]
Furthermore, the FCA emphasises that firms need to have adequate systems in place to sign-off digital media communications. This sign-off should be by a person of appropriate competence and seniority within the organisation. Firms should also keep adequate records of any significant communications.
To view the full FG15/4 Social media and customer communications guidance paper please follow this link.
Should you require any further advice or information on the above, Cleveland & Co, your external in-house counsel, are here to help.
[1] fshandbook.info/FS/glossary-html/handbook/Glossary/I?definition=G2470 and see also COBS 4.5.1R (2)(b), MCOB 3.2.5R (2) and CONC 3.1.7R
[2] The Information Commissioner’s Office website provides more information through its Direct Marketing guidance.
