The UK’s Financial Conduct Authority (FCA) has published its guidance on using social media for financial promotions.
In the guidance, the FCA made it clear that they understand the power of social media as a communication tool and the benefit it can have for both firms and their customers. However, the FCA also emphasised that any communications via social media had to meet the FCA’s requirements of being, among other things, “fair, clear and not misleading” in exactly the same way as traditional media.
The guidance reminds firms that any communication, no matter how it is made, is likely to be deemed a financial promotion if it includes any invitation or inducement to engage in financial activity. One of the difficulties highlighted by the FCA in relation to social media, as opposed to the more traditional forms of communication, is that of controlling who receives any promotion.
What about unintended recipients? The communication might be “fair, clear and not misleading” for the person to whom it is sent, but what if it is then shared on the recipient’s social media page or ‘retweeted’? It could reach a wide range of recipients, not just the intended target group. The result, according to the FCA, could be that consumers end up buying products which do not match their needs. The FCA made it clear that firms should factor this into how they use social media, even if the outcome is not something they can control directly.
What is the best media to use? In relation to communications generally, firms should also consider whether the type of media is appropriate to the nature of the promotion. For example, is it possible to explain all the risks of a complex product in a tweet? The FCA suggests that a better approach in such circumstances would be to use Twitter to link-through to a site which gives more detailed information, or to use Twitter to advertise the firm more generically, rather than specific financial products.
Key considerations As well as highlighting the more general risks of using social media to promote products, the guidance deals with a number of specific areas and issues which firms should consider, including:
- The need to consider each individual communication on its own merits, not as part of a wider campaign. Firms will have to ensure that any communication is, in its own right, “fair, clear and not misleading” and complies with the relevant rules when read alone. This is the test that the FCA will apply.
- The fact that the requirement to include risk warnings and other obligatory wording for certain products applies to social media in the same way it does for more traditional forms of communication. Being limited by how many characters you can include on a tweet or status update is not an excuse for not including obligatory wording.
- When dealing with methods of communication which have a limit on the number of characters which can be used, firms might want to consider ‘image advertising’ in a way that gets the message across clearly and in a compliant manner. This is still likely to be more appropriate for advertising the firm rather than products which require risk warnings, however.
- Although firms might not be directly liable for communications being shared or forwarded to unintended recipients, firms should bear in mind the risk that this might happen and, in any event, should ensure that the original communication was compliant with the rules.
- Firms should be mindful of the risk that any communications made through social media could fall foul of rules relating to unsolicited communications and ‘cold calling’.
- The requirement to ensure that all social and digital media communications are signed off by someone appropriately senior within the organisation (as opposed to giving someone junior the ‘keys’ to the Twitter account and a carte blanche to tweet at will). A full record of the approval process should also be maintained.
All this acts as a useful reminder to firms of the potential pitfalls of social media. Although undoubtedly a great way to reach a huge number of potential customers, social media does have its own risks and care will need to be taken with all communications to ensure they comply with the relevant rules.
Client Alert 2015-068