FCA publishes final guidance on financial promotions made on social media

This article was produced by Nabarro LLP, which joined CMS on 1 May 2017.

Summary and implications

In June 2010, the Financial Conduct Authority's (FCA) predecessor, the Financial Services Authority (FSA), released a guidance note on financial promotions made using "new media". This followed the FSA's study of 30 Twitter and Facebook pages of a variety of firms in the UK financial sector, many of which it found to be in breach of financial promotion rules. The guidance confirmed that the FSA's rules on financial promotions apply to new media in exactly the same way as financial promotions made using any other medium. The requirement to use risk warnings was highlighted and the FSA even went as far as to question the general suitability of media such as Twitter for making financial promotions, due to the limit on the number of characters that may be used.

In August 2014, the FCA consulted on further guidance on social media and customer communications and consolidated the finalised guidance in March 2015. In this guidance, the FCA states that while it does not want to prevent the use of social media, recognising that it can be a powerful tool, the underlying principles remain the same – the financial promotion rules apply to social media communications in exactly the same way as they apply to any other type of communication.

The finalised guidance gives a number of important insights into and examples of specific uses of social media and the financial promotion regime. We summarise some of the examples below.

Are employees of firms caught when using personal social media accounts?

Only financial promotions made in the course of business are subject to the FCA's financial promotion rules. The key factor in determining whether a communication is made "in the course of business" is the purpose of that communication, rather than the person who makes it. Employees using personal social media accounts to send communications which are inducements or invitations will be deemed to be acting "in the course of business" if they are trying to obtain business for their firm. However genuine, non-business communications by employees will not be caught.

Requirement for standalone compliance

The FCA reiterates that each communication must be considered individually and must be compliant in its own right. One suggestion made to the FCA was that tweets and posts should be viewed as part of a wider "customer journey", meaning that a promotion could be made alongside a link to a website, where users are shown full risk warnings. The FCA does not agree with this suggestion. Its approach is to consider each individual tweet or post as a separate financial promotion, meaning that each must comply separately with the specific requirements on financial promotions and must also meet the requirement of being clear, fair and not misleading. The use of social media to "signpost" consumers to websites is permitted, provided that such signposting language itself does not contain any financial promotion or inducement.

Sharing or re-tweeting of financial promotions

Any communication must be clear, fair and not misleading, even if seen by a non-intended recipient. However, in the context of re-tweeting or sharing, responsibility is assumed by the user re-tweeting or sharing that communication, for example. If an individual re-tweets a financial promotion, not in the course of business, that user's re-tweet is not a financial promotion, but the original tweet remains one. Conversely, if a user, acting in the course of business, re-tweets or shares a communication, which was previously communicated not in the course of business, then that re-tweet or shared message may become a financial promotion. Again the FCA has stated the importance of assessing the purpose of any communication, including re-tweets.

#RiskWarnings

The FCA originally consulted on the idea that hashtags could be used as a way of drawing consumer attention to the fact that a Twitter communication is a financial promotion, suggesting the example "#ad". However, the FCA has now concluded that hashtags are not an appropriate way of identifying promotional content. A number of firms have been using a variety of hashtags as short form risk warnings, including #capitalatrisk, #investaware and #RiskAware. The FCA has confirmed, in no uncertain terms, that hashtags are not suitable for giving risk warnings to consumers. In particular, the FCA has highlighted the fact that hashtags merely link to similar, possibly irrelevant, web pages and do not contain any substantial explanation of risk for consumers.

The use of image advertising

The FCA has reminded firms that the use of image advertising may allow them to promote the name, logo, or other associated image of their firm on social media without needing to comply with the full financial promotion rules. In order to make use of this exemption, firms must be careful only to include limited information about the firm and its activities, making sure that the image does not constitute a financial promotion. As with any communication, firms must make sure that the information and images given are clear, fair and not misleading.