The Financial Conduct Authority is consulting on draft updated guidance for financial promotions on social media.
It points out that all financial promotions should be fair, clear and not misleading. The financial promotion rules are designed to be technology neutral and apply across all channels used to advertise, including social media. The aim of the new guidance is to help firms understand how the rules apply and the FCA's expectations for financial promotions on social media.
The Consumer Duty (coming into force on 31 July) will increase the FCA's expectations of firms communicating or approving financial promotions. It wants firms to consider this guidance alongside their obligations under the Duty to help them deliver good outcomes for retail customers.
Unauthorised persons, such as social media influencers, who promote a regulated financial product or service without approval of an FCA authorised person may be committing a criminal offence. The FCA's guidance provides additional clarity on when a communication might constitute a financial promotion. The previous guidance was published in 2015 and some aspects have been retained, such as the expectation that financial promotions to be compliant in their own right and that required information will be sufficiently prominent.
The new guidance explains how these principles should be applied in different social media marketing channels and considers how the requisite information can be obscured well as looking to address specific design features on social media that act to obscure required information. It also includes examples of promotions across a variety of financial services to aid understanding of the FCA's expectations.
What is new?
Where applicable, the Consumer Duty will raise the FCA's expectations of firms communicating financial promotions on social media above the requirement to be ‘clear, fair and not misleading’. FCA rules require firms to act to deliver good outcomes for retail customers and the guidance supplements the FCA's expectations of this requirement for communications on social media.
It also contains guidance on emerging marketing trends on social media such as affiliate marketing. It stresses that firms should be monitoring the communications of those using their affiliate links to ensure good outcomes for consumers. It also looks to address the harm that can occur where UK consumers interact with financial promotions which direct them to a non-UK entity while the UK consumer still believes they are engaging with an FCA-regulated firm. The FCA highlights techniques that firms can use to mitigate this risk, as well as stressing to firms that any communication capable of having an effect within the UK will be subject to the rules.
The guidance also covers influencers communicating approved financial promotions, and highlights how firms should approve the communications of influencers on social media, explaining that they should play an active role in ensuring the continuing compliance of the relevant communication for its lifetime.
Finally, the guidance covers unauthorised influencers communicating illegal financial promotions. The FCA says that it has seen cases of influencers communicating financial promotions without realising they fall within the financial promotion perimeter. This is because often firms and influencers assume there must be direct monetary compensation for an influencer’s post to be subject to the financial promotion regime. The guidance therefore provides information about the perimeter in relation to financial promotions on social media under Section 21 of the Financial Services and Markets Act 2000.
The consultation ends on 11 September 2023.
the UK social media advertising market was worth £6.4bn in 2021, representing nearly a third of all internet advertising spend. It is crucial that financial promotions on social media are of good quality and are fair, clear and not misleading.