The UK Financial Conduct Authority has published consultative guidance on how its financial promotion requirements apply to promotions on social media. By definition, all financial promotions should be fair, clear and not misleading. The FCA’s financial promotion rules are deliberately designed to be technology neutral and apply across all channels used to advertise, including social media.
The FCA last published guidance on its approach to the supervision of financial promotions in social media in 2015 and since then, the channels used to promote financial products have changed considerably. The use of video, chat, emojis and GIFs have all increased significantly in the last few years. In addition, social media itself 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 can lead to significant consumer harm due to their wide reach and the complex nature of financial services.
The proposed enhanced guidance and clarity around regulatory expectations will sit alongside the Consumer Duty which comes into effect at the end of July 2023. Specifically, the bar will be raised above the requirement of ‘clear, fair and not misleading’ to a requirement for firms ‘to act to deliver good outcomes for retail customers’ and the FCA is clear that it will use the guidance to supplement its expectations for communications on social media.
The non-negotiable baseplate for firms to be able to comply with regulatory requirements around communications (whether or not on social media) is the ability to capture, preserve, retrieve and supervise all in native context. Firms will simply not be able to meet their regulatory obligations if they cannot evidence, say, the appropriate authorized approval of a financial promotion that included a video. Sales professionals have, for instance, grown comfortable creating video messages and incorporating them into their customer outreach, adding a personal touch to their process - after all it's much simpler and more effective to create a 60-90 second video as opposed to a long email. As part of that video-enhanced approach, firms need to ensure that any promotional videos are clear, do not mislead consumers, and, as a matter of course, include important information like disclaimers and approved firm logos. Firms also need to have the capability to pre-review and approve video content before it is published to firm websites, industry publications or on social media. All of which would need to be able to be captured so the firm can preserve, archive and retrieve videos as required.
Another example is the need to be able to native context capture an emoji - put simply, you need to capture the money bags emoji 💰to be able to then preserve, retrieve and supervise for the money bags emoji.
And failing to meet the financial promotion requirements by an inability to evidence compliance can have severe, potentially criminal, consequences. That is before the challenge of unauthorized persons, such as social media influencers, who promote a regulated financial product or service without approval of an FCA authorized person who may also be committing a criminal offense. Indeed a breach of the financial promotion restriction is a criminal offense punishable by up to two years imprisonment, the imposition of an unlimited fine, or both.
The FCA expects financial promotions to be standalone compliant. This means that each stage of a financial promotion must comply with the rules - that also means firms need to be able to evidence compliance at each stage of a financial promotion. To add to the considerations, firms need to be aware that the promotions of complex financial products might require additional supporting information or disclosure to enable consumer understanding. Firms may include supporting hyperlinks or separate pathways for a consumer. Links to additional information should be ‘clearly and prominently brought to the consumer’s attention’ and should give consumers enough information to make an informed decision. Again firms will need to be able evidence this has happened.
When assessing the compliance of a promotion that is viewed via a dynamic medium 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 within the promotion. Critically, to meet expectations regarding prominence, firms should aim to display the key information about risk upon a consumer’s first interaction with the promotion and the warning should be displayed for a sustained period. The FCA has provided examples of good and poor practice on the prominence of required information.
Again, it will be essential for firms to be able to evidence compliance with the risk disclosure and prominence expectations and to do that firms will need to be able to native context capture the entire promotion (including any hyperlinks and underlying information and/or disclosures).
The FCA has not minced its words with regard to its expectations - ‘firms should regularly test, monitor and adapt communications to support good consumer outcomes. This will be especially relevant as social media evolves and new features emerge that may impact consumer understanding. Firm’s should also keep adequate records of any relevant communications. As well as helping to protect consumers, these records enable the firm to deal effectively with any subsequent claims or complaints. Firms should not rely on digital media channels to maintain records, as they will not have control over this. Social media platforms may refresh content from time to time, with the consequent deletion of older material.’
The FCA is also clear that the current sign-off and record-keeping provisions in the FCA’s Handbook apply to digital (including specifically social) media in the same way as to print, broadcast and outdoor media. The regulator has also reminded firms that ‘these issues’ should be part of the overall risk management of a firm and that ‘risk management encompasses all relevant risks, including legal and reputational risk, as well as regulatory risk.’
In other words, digital communications governance must become a core competency for firms. Firms using social media for financial promotions and other communications must have the ability to preserve an ever widening range of content including videos, emojis, GIFs and chat (as well as additions and deletions). Given the enhanced regulatory expectations around financial promotions on social media (and communications more widely), it is essential that records are captured and preserved in their native context to allow the content to be retrieved in its original state and properly surveilled to provide evidence of robust compliance with all elements of the financial promotions requirements.
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