In August 2014, the Financial Conduct Authority (FCA) announced guidance on social media marketing for firms it regulates.
Many firms are understandably keen to use social media for promotional purposes, as so many potential customers now use Facebook, Twitter, LinkedIn, YouTube and the like. However, the message from the FCA’s guidance is clear, in that the limitations of any particular form of social media cannot be used as an excuse for failing to follow the FCA’s financial promotions rules. Throughout the guidance, its rules are described as being ‘media neutral’, so Principle 7 about communications being ‘clear, fair and not misleading’ still apply, as do the detailed promotions rules in the COBS, MCOBS, ICOBS and CONC sourcebooks.
One of the main limitations of social media is that the size and length of messages are often limited, for example Twitter posts are restricted to 140 characters. This means that social media may be inappropriate for conveying detailed or complex information. The FCA says that firms are permitted to add images into their social media posts in order to ensure that all required information is given, but adds that any required risk warnings must appear in the body of the message and not in the image.
Adding a web link to a social media message may also not solve the problem. The FCA says that the message must be compliant with the promotions rules in its own right, regardless of the level of information provided on the signposted webpage.
The requirement for financial promotions to be clearly identifiable as such applies as much to social media as to other communication methods.
Firms are advised that the fact that a customer has chosen to follow a firm on social media, or has indicated their approval of a communication – such as ‘liking’ a Facebook post or ‘favouriting’ a tweet – does not indicate explicit consent to receive unsolicited marketing communications.
Social media promotions are likely to meet the FCA’s definition of a non-real-time promotion rather than a real-time promotion, as the extent of the interaction between the firm and the recipients is limited.
Finally, the guidance mentions two important issues regarding forwarding of social media communications, such as via re-tweeting. Firstly, if a recipient forwards a communication, the firm remains responsible for the compliance of the original communication. Secondly, before forwarding any communication received from a customer, a firm must consider whether it would fall under the financial promotions rules and thus make them responsible for its content.
Firms are thus advised to think carefully before using social media promotions. Is the medium being considered appropriate for the message that needs to be conveyed?
However, firms are reminded that the FCA defines a promotion as: ‘an invitation or inducement to engage in investment activity that is communicated in the course of business’. This means that any communication via social media which does not provide an invitation or an inducement does not need to comply with the FCA’s rules, and firms’ non-business communications via social media are also likely to be excluded.
Clive Adamson, Director of Supervision at the FCA said of the issue:
“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.”